December 16, 2011


RE: Changes to Line of Credit Approval and Reporting Process

To the Chief Executive Officer of the Credit Union Addressed:

            This letter serves to notify you that the Division of Banks (Division) has amended its procedures regarding lines of credit.   

            Currently, under the authority of Massachusetts General Laws chapter 171, section 73, state-chartered credit unions must request approval from the Commissioner of Banks to establish a line of credit and must request approval from the Commissioner every two years to renew said line.  In addition, credit unions with existing lines of credit must notify the Division of all drawings and repayments on the line of credit.  The Division recognizes that the administrative function associated with maintaining approval with the Division for a line of credit can be burdensome.  In addition, during the Regional Roundtable Meetings conducted by the Division and Massachusetts Credit Union League in June 2011, feedback from the state-chartered credit unions indicated that the Division should consider reviewing its procedures in this area.      

            After a review of the line of credit approval and reporting procedures, the following changes are effective immediately:


Old ProcedureNew Procedure
Approval to renew the line is required every two years from the DivisionOne-time initial approval of the line with no required renewal from the Division
Notify the Division of all drawings and repayments on each line of creditReporting of drawings and repayments is no longer required


            The Division utilizes other processes, such as off-site monitoring and the examination program, to oversee line of credit activity and risks.  Nevertheless, to ensure that we are able to continue to effectively oversee certain borrowing relationships under Massachusetts General Laws chapter 171, section 73, some procedures will not change.  For example, initial approval by the Division is required to establish a new line of credit.  In addition, the Division would still need to be notified in writing at least thirty days in advance of any material changes to the credit line, such as an increase in the approved amount or if the line is closed.

 The Division appreciates the feedback we received during the Regional Roundtable Meetings and always welcomes suggestions you may have.  We hope that these changes will result in less regulatory burden for credit union officials, provide greater flexibility to manage your credit union’s liquidity, and allow management to focus its efforts on meeting member and community needs. 

            Should you have any questions relative to this matter, please contact Chief Director Andrea Cipolla at (617)956-1532 or





                                                                                    David J. Cotney

                                                                                    Commissioner of Banks



cc:        Daniel F. Egan, Jr., President

Massachusetts Credit Union League