Section 701.25 - Loans to credit unions(a)Limits. A Federal credit union may make loans, including investments in Subordinated Debt, to other credit unions, including corporate credit unions and privately insured credit unions, subject to the following limits:(1)Aggregate limit. The aggregate principal amount of loans to other credit unions may not exceed 25 percent of the Federal credit union's paid-in and unimpaired capital and surplus.(2)Single borrower limit. The aggregate principal amount of loans made to any one credit union may not exceed the greater of 15 percent of the Federal credit union's net worth, as defined in part 702 of this chapter, at the time of the closing of the loan or $100,000, plus an additional 10 percent of the Federal credit union's net worth if the amount that exceeds the Federal credit union's 15 percent general limit is fully secured at all times with a perfected security interest by readily marketable collateral as defined in § 723.2 of this chapter.(b)Approval and policies. A Federal credit union's board of directors must approve all loans to other credit unions and establish written policies for making such loans. The written policies must, at a minimum, include the following:(1) How the Federal credit union will manage the credit risk of loans to other credit unions; and(2) The limits on the aggregate principal amount of loans the Federal credit union can make to other credit unions. The policies must specify the limits on the aggregate principal amount of loans the Federal credit union can make to all other credit unions and the aggregate principal amount of loans the Federal credit union can make to any single credit union; provided that any limits included in such policies do not exceed the limits in this section.(c)Investment in Subordinated Debt -(1)Eligibility. A Federal credit union may only invest, directly or indirectly, in the Subordinated Debt of federally insured, natural person credit unions, or in loans or obligations issued by a privately insured credit union that are subordinate to the private insurer; provided that the investing Federal credit union:(i) Has at the time of the investment, a capital classification of "well capitalized," as defined in part 702 of this chapter;(ii) Does not have any outstanding Subordinated Debt or Grandfathered Secondary Capital, in each case with respect to which it was the Issuing Credit Union (as defined in part 702 of this chapter); and(iii) Is not eligible to issue Subordinated Debt or Grandfathered Secondary Capital pursuant to an unexpired approval from the NCUA under subpart D of part 702 of this chapter.(2)Aggregate limit - (i)Aggregate limit. A Federal credit union's aggregate investment (direct or indirect) in the Subordinated Debt and Grandfathered Secondary Capital of any federally insured, natural person credit union, and in loans or obligations issued by a privately insured credit union that are subordinate to the private insurer, may not cause such aggregate investment to exceed, at the time of the investment, the lesser of:(A) 25 percent of the investing Federal credit union's net worth at the time of the investment; and(B) Any amount of net worth in excess of seven percent (7%) of total assets.(ii)Calculation of aggregate limit. The amount subject to the limit in paragraph (c)(2)(i)(A) of this section is calculated at the time of investment, and is based on a Federal credit union's aggregate outstanding:(A) Investment in Subordinated Debt;(B) Investment in Grandfathered Secondary Capital;(C) Investment in loans or obligations issued by a privately insured credit union that are subordinate to the private insurer; and(D) Loans or portion of loans made by the credit union that is secured by any Subordinated Debt, Grandfathered Secondary Capital, or loans or obligations issued by a privately insured credit union that are subordinate to the private insurer.(3)Indirect investment. A Federal credit union must determine its indirect exposure by calculating its proportional ownership share of each exposure held in a fund, or similar indirect investment. The Federal credit union's exposure to the fund is equal to the exposure held by the fund as if they were held directly by the Federal credit union, multiplied by the Federal credit union's proportional ownership share of the fund. 86 FR 11072 , Feb. 23, 2021