Rule2026-16035
Limits on Loans to Other Credit Unions
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 6, 2026
Effective
September 8, 2026
Issuing agencies
National Credit Union Administration
Abstract
The NCUA Board (Board) is issuing this rule to remove the regulations related to approval and policies on making loans to other credit unions. While this provision will no longer be codified in regulation, federal credit unions remain subject to statutory requirements related to making loans to credit unions. Federally insured, state-chartered credit unions remain subject to any other applicable NCUA or state law or regulation. The final rule follows publication of a December 29, 2025, proposed rule, and takes into consideration the public comments recieved on the proposal.
Full Text
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<title>Federal Register, Volume 91 Issue 150 (Thursday, August 6, 2026)</title>
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[Federal Register Volume 91, Number 150 (Thursday, August 6, 2026)]
[Rules and Regulations]
[Pages 50664-50666]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-16035]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3133-AF72
Limits on Loans to Other Credit Unions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: The NCUA Board (Board) is issuing this rule to remove the
regulations related to approval and policies on making loans to other
credit unions. While this provision will no longer be codified in
regulation, federal credit unions remain subject to statutory
requirements related to making loans to credit unions. Federally
insured, state-chartered credit unions remain subject to any other
applicable NCUA or state law or regulation. The final rule follows
publication of a December 29, 2025, proposed rule, and takes into
consideration the public comments recieved on the proposal.
DATES: This final rule is effective on September 8, 2026.
FOR FURTHER INFORMATION CONTACT: Ariel Pereira, Senior Attorney, Office
of General Counsel, at (703) 518-6540 or at 1775 Duke Street,
Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
The regulations in Sec. 701.25 govern the ability of a federal
credit union (FCU) to make loans, including investments in subordinated
debt, to other credit unions. In accordance with section 107(7)(C) of
the FCU Act, the regulation establishes an aggregate limit on such
loans of 25 percent of the lending FCU's paid-in and unimpaired capital
and surplus.\1\ It also sets limits for loans to a single credit union
borrower. The regulation sets forth specific eligibility requirements
and aggregate limits for FCUs that invest in the subordinated debt of
other credit unions. The requirements of Sec. 701.25 are made
applicable to federally insured, state-chartered credit unions (FISCUs)
through Sec. 741.227.\2\
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\1\ 12 U.S.C. 1757(7)(C). This statutory provision provides that
an FCU may invest its funds ``in accordance with rules and
regulations prescribed by the Board, in loans to other credit unions
in the total amount not exceeding 25 per centum of its paid-in and
unimpaired capital and surplus.'' In addition, section 107(5)(A)(x)
of the FCU Act limits the aggregate amount that a single member may
borrow from an FCU to ``10 per centum of the credit union's
unimpaired capital and surplus'' (12 U.S.C. 1757(5)(A)(x)).
\2\ FCUs and FISCUs are collectively referred to as federally
insured credit unions, or FICUs.
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In addition to the limits discussed above, Sec. 701.25 imposes
documentation requirements on FCU boards of directors, and through
Sec. 741.227 on FISCU boards as well. Specifically, paragraph (b) of
Sec. 701.25 requires the board of directors to approve all loans to
other credit unions and to establish written policies for managing the
associated credit risk. The policies must specify the limits on the
aggregate principal amount of loans the FICU can make to all other
credit unions and the aggregate principal amount of loans the FICU can
make to any single credit union. Such limits specific to the FICU may
not exceed the generally applicable limits established in Sec. 701.25.
On December 29, 2025, the Board published a proposed rule
requesting public comment on the removal of the documentation
requirements codified in 12 CFR 701.25(b).\3\ As explained in the
preamble to the proposed rule, the Board believes this portion of the
regulation is unnecessary and overly prescriptive. The FCU Act already
requires an FCU's board of directors to approve all loans to other
credit unions.\4\ Accordingly, for FCUs, Sec. 701.25(b) is largely
redundant of an existing statutory requirement. Moreover, FICU boards
are in the best position to determine whether formal approval policies
are necessary for such loans, consistent with the number, size, and
risks associated with the FICU's lending practices. This final rule
follows publication of the December 29, 2025, proposed rule, and takes
into consideration the public comments received on the proposal.
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\3\ 90 FR 60583 (Dec. 29, 2025).
\4\ 12 U.S.C. 1757(5)(C).
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B. Legal Authority
The Board is issuing this final rule pursuant to its authority
under the FCU Act. Under the FCU Act, NCUA is the chartering and
supervisory authority for FCUs and the federal supervisory authority
for FICUs.\5\ The FCU Act grants NCUA a broad mandate to issue
regulations governing both FCUs and all FICUs. Section 120 of the FCU
Act is a general grant of regulatory authority and authorizes the Board
to prescribe rules and regulations for the administration of the FCU
Act.\6\ Section 207 of the FCU Act is a specific grant of authority
over share insurance coverage, conservatorships, and liquidations.\7\
Section 209 of the FCU Act is a plenary grant of regulatory authority
to issue rules and regulations necessary or appropriate to carry out
its role as share insurer for all FICUs.\8\ Accordingly, the FCU Act
grants the Board broad rulemaking authority to ensure that the
federally insured credit union industry and the Share Insurance Fund
remain safe and sound.
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\5\ 12 U.S.C. 1752-1775.
\6\ 12 U.S.C. 1766(a).
\7\ 12 U.S.C. 1787.
\8\ 12 U.S.C. 1789.
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II. Final Rule
A. Overview
This final rule follows publication of the proposed rule and takes
into consideration the comments received on the proposal. By the close
of the public comment period on February 27, 2026, the Board had
received 10 public comments. Comments were submitted by credit union
leagues, a national association of state credit union supervisors,
trade organizations, and advocacy organizations. After careful
consideration of the issue raised by the commenters, the Board has
decided to
[[Page 50665]]
adopt the proposal without change. The Board emphasizes that while FICU
boards will no longer be required to adopt written policies regarding
aggregate limits on loans to other credit unions, FICUs remain subject
to the limits and other requirements regarding such loans set forth in
the other provisions of Sec. 701.25. FISCUs should refer to state law
to determine whether their boards must approve loans to other credit
unions.
B. Discussion of Public Comments
This section of the preamble discusses the significant issues
raised by the commenters, and the Board's responses to the comments.
1. Unanimous Support for Proposed Rule
The commenters were unanimous in their support for the proposed
rule. They agreed with the NCUA's assessment that the documentation
requirements are duplicative and unnecessary. The commenters wrote that
removal of Sec. 701.25(b) would enable FICUs to more efficiently
manage liquidity and enhance mutual support among credit unions. The
commenters also appreciated the reduction in compliance burden, noting
that this would especially benefit smaller FICUs.
NCUA Response. The Board appreciates the support expressed by the
commenters and agrees that removal of Sec. 701.25(b) will provide
FICUs with greater flexibility. As noted, the Board has elected to
adopt the proposed rule without change.
2. Additional Suggested Improvements to Loan Limit Requirements
One commenter, a national trade organization, also offered the
following suggestions for additional changes to the NCUA requirements
governing credit union lending to other credit unions.
Comment: Upfront consolidation of lender prohibitions. The
commenter suggested the NCUA consider revising its regulation and
accompanying instructions so that lender prohibitions are clearly
presented at the beginning of the document rather than being embedded.
The commenter wrote that placing these prohibitions in a more prominent
location would help reduce confusion by making this critical
information easier to identify and navigate.
NCUA Response. The Board is always interested in feedback on the
clarity of its regulatory requirements and instructions. However, the
commenter's suggestion is outside the scope of this rulemaking.
Accordingly, the Board has not revised the rule in response to the
comment.
Comment: Greater flexibility in addressing limit violations. The
commenter also suggested the NCUA consider providing greater
flexibility when a credit union exceeds the generally applicable
limits, rather than requiring the FICU dispose of these investments.
The commenter wrote that FICUs have incurred hundreds of thousands of
dollars in losses when compelled to dispose of some of these assets.
NCUA Response. The commenter's suggestion is outside the scope of
the rulemaking and, therefore, no change to the rule has been made in
response.
Comment: Due diligence requirements. The commenter objected that
the pre- and post-funding due diligence requirements for these
transactions are unnecessarily cumbersome. While recognizing the
importance of proper underwriting and risk management, the commenter
wrote that any reduction by the NCUA would constitute significant
relief for credit unions. In particular, the commenter suggested that
the NCUA adopt a tiered approach in which the scope of required due
diligence varies based on the loan amount or the issuing credit union's
CAMELS rating, rather than adhering to the current one-size-fits-all
framework.
NCUA Response. The scope of the recommendation made by the
commenter is broader than that of the proposed rule. No change to the
rule has therefore been made, as the comment is outside the scope of
the rulemaking.
3. Consolidation of Deposit Insurance Regulations
One commenter, a national association of state credit union
supervisors, recommended the NCUA consolidate all of its deposit
insurance related regulations in a clearly delineated, self-contained
sub-chapter distinct from the FCU chartering and operational
requirements. The commenter wrote that that would clarify when the NCUA
is acting in its capacity as share insurer for all FICUs versus as
regulator for FCUs, reducing ambiguity for state-chartered institutions
and examiners. The commenter also wrote that such consolidation would
significantly reduce regulatory burden by eliminating the current need
of FISCUs to navigate through the entirety of the NCUA's regulations to
find even minor share insurance provisions applicable to FISCUs.
NCUA Response. The suggestion made by the commenter is outside the
scope of the rulemaking. Accordingly, the rule has not been revised in
response to the comment. However, the NCUA remains committed to working
with all credit unions to ensure the clarity of their regulatory
obligations.
III. Regulatory Procedures
A. Executive Orders 12866, 13563, and 14192
Pursuant to Executive Order 12866 (``Regulatory Planning and
Review''), a determination must be made whether a regulatory action is
significant and therefore subject to review by the Office of
Information and Regulatory Affairs (OIRA), within the Office of
Management and Budget (OMB) in accordance with the requirements of the
Executive Order.\9\ Executive Order 13563 (``Improving Regulation and
Regulatory Review'') supplements and reaffirms the principles,
structures, and definitions governing contemporary regulatory review
established in Executive Order 12866.\10\ This final rule was drafted
and reviewed in accordance with Executive Order 12866 and Executive
Order 13563. OIRA has determined that this final rule is not a
``significant regulatory action'' as defined by section 3(f) of
Executive Order 12866.
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\9\ 58 FR 51735 (Oct. 4, 1993).
\10\ 76 FR 3821 (Jan. 21, 2011).
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Executive Order 14192 (``Unleashing Prosperity Through
Deregulation'') requires that any new incremental costs associated with
new regulations shall, to the extent permitted by law, be offset by the
elimination of existing costs associated with at least 10 prior
regulations.\11\ This final rule is considered an Executive Order 14192
deregulatory action.
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\11\ 90 FR 9065 (Feb. 6, 2025).
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B. Regulatory Flexibility Act
The Regulatory Flexibility Act \12\ generally requires an agency to
conduct a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements, unless the agency certifies that
the rule will not have a significant economic impact on a substantial
number of small entities. If the agency makes such a certification, it
shall publish the certification at the time of publication of either
the proposed rule or the final rule, along with a statement providing
the factual basis for such certification.\13\ For purposes of this
analysis, NCUA considers small credit unions to be those having under
$100 million in assets.\14\ The Board fully considered the
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potential economic impacts of the regulatory amendments on small credit
unions.
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\12\ 5 U.S.C.601 et seq.
\13\ 5 U.S.C. 605(b).
\14\ 80 FR 57512 (Sept. 24, 2015).
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To the extent that the final rule has any economic impacts, they
are deregulatory in nature. The final rule removes the requirement that
FICU boards adopt minimum approval and written policy standards
regarding loans to other credit unions. While these documentation
requirements might impose some economic costs on FICUs, they are
unlikely to be significant. Any impacts associated with their
rescission are therefore also unlikely to impose a significant economic
burden. Accordingly, NCUA certifies the final rule will not have a
significant economic impact on a substantial number of small credit
unions.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) generally provides that
an agency may not conduct or sponsor, and not withstanding any other
provision of law, a person is not required to respond to, a collection
of information, unless it displays a currently valid OMB control
number. The PRA applies to rulemaking in which an agency creates a new
or amends existing information collection requirements. For purposes of
the PRA, an information collection requirement may take the form of a
reporting, recordkeeping, or a third-party disclosure requirement.
The information collection requirements contained in 12 CFR
701.25(b) are approved by OMB under OMB Control Number 3133-0207. The
rescission of these regulations, along with the information collection
requirement(s) contained therein and the revision of OMB Control Number
3133-0207, will reduce public information collection burden by an
estimated 1,250 annual burden hours.
D. Executive Order 13132 on Federalism
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests.\15\
NCUA, an agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order to adhere to fundamental federalism
principles. This final rule applies to FCUs and to FISCUs. The
rulemaking may, therefore, have some direct effect on the states, the
relationship between the national government and the states, or on the
distribution of power and responsibilities among the various levels of
government. However, to the extent the rule has any such effects, it
will be to relieve FISCUs of regulatory burden. The final rule removes
the requirement that FICU boards adopt minimum approval and written
policy standards regarding loans to other credit unions. In doing so,
the final rule defers to state law on approval requirements for loans
that FISCUs make to other credit unions.
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\15\ 64 FR 43255 (Aug. 4, 1999).
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E. Assessment of Federal Regulations and Policies on Families
NCUA has determined that this final rule will not affect family
well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999.\16\ The regulatory
requirements are exclusively concerned with the adoption of written
policies by FICUs regarding loans to other credit unions. The potential
positive effect on family well-being, including financial well-being,
is, at most, indirect.
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\16\ Public Law 105-277, 112 Stat. 2681 (1998).
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F. Congressional Review Act
Subtitle E of the Small Business Regulatory Enforcement Fairness
Act of 1996, also known as the Congressional Review Act (CRA),
generally provides for congressional review of agency rules.\17\ NCUA
must submit a report to Congress and the Comptroller General when it
issues a final rule, as defined by the CRA.\18\ An agency rule, in
addition to being subject to congressional oversight, may also be
subject to a delayed effective date if the rule is a ``major rule.''
OIRA has determined that this rule is not a ``major rule'' within the
meaning of the relevant sections of the CRA. NCUA will also file
appropriate reports with Congress and the Comptroller General so this
rule may be reviewed.
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\17\ 5 U.S.C. 801-808.
\18\ 5 U.S.C. 804(3).
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List of Subjects in 12 CFR Part 701
Advertising, Aged, Civil rights, Credit, Credit unions, Fair
housing, Individuals with disabilities, Insurance, Marital status
discrimination, Mortgages, Religious discrimination, Reporting and
recordkeeping requirements, Sex discrimination, Signs and symbols,
Surety bonds.
By the National Credit Union Administration Board, this 29th day
of July, 2026.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons stated in the preamble, the NCUA Board amends 12
CFR part 701 as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
1. The authority citation for part 701 is revised to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761, 1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788,
1789. Section 701.6 is also authorized by 15 U.S.C. 3717. Section
701.31 is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981
and 3601-3610. Section 701.35 is also authorized by 12 U.S.C. 4311-
4312.
Sec. 701.25 [Amended]
0
2. In Sec. 701.25 remove paragraph (b) and redesignate paragraph (c)
as paragraph (b).
[FR Doc. 2026-16035 Filed 8-5-26; 8:45 am]
BILLING CODE 7535-01-P
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</html>Indexed from Federal Register on August 6, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.