NCUA's Matz, CUNA's Cheney make case for lifting MBL cap to U.S. Senate Banking Committee
06/17/2011 03:22 pm
During a Senate Banking Committee hearing on Thursday, various bank and credit union representatives testified including Debbie Matz, National Credit Union Administration (NCUA) chairman. Matz testified that raising the "artificially low" credit union member business lending (MBL) cap, which stands at 12.25 percent of assets, would increase the safety and soundness of credit unions by helping them diversify their portfolios and reducing risk concentrations.
The committee hearing centered on bill
S. 509, a bill that would increase the credit union member business lending cap to 27.5 percent of assets. The relatively small size of credit union business loans, and the agency's strong underwriting standards, significantly ease any safety and soundness concerns that would accompany increased business lending authority, Matz added.
Credit Union National Association (CUNA) President/CEO Bill Cheney also testified during the hearing, asserting, as small business owners continue to be turned away by banks when they come in search of a loan, credit unions stand ready to pick up the slack and provide small businesses access to much needed credit without putting taxpayer funds at risk. Cheney during his testimony said that "bank loans to businesses have fallen by 4 percent since March, while credit union business lending has increased by 5 percent during that same time period," he said.
Cheney said that the cap lift is a necessary change for smaller credit unions to become more involved in business lending. The additional income will allow credit unions that otherwise would not have participated in business lending to bring in personnel with business lending expertise and to establish the procedures, safeguards, and internal controls needed to run a business lending program.
Overall, business lending delinquencies at credit unions have declined during the last quarter, and delinquent loans held by credit unions do not always result in losses if the loans are well collateralized. CUNA has estimated that lifting the cap would inject $13 billion in funds into the economy, creating over 140,000 new jobs.
S. 509 had 19 co-sponsors at press time, including Senate Majority Leader Harry Reid (D-Nev.). Fellow co-sponsor Sen. Charles Schumer (D-N.Y.), in a statement submitted for the hearing record, called the cap lift a "commonsense way to immediately increase the amount of credit available to small businesses."
A House version of MBL cap lift legislation was introduced earlier this year by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.), and that bill has 38 total co-sponsors.