WASHINGTON (7/30/15)--CUNA President/CEO Jim Nussle affirmed the safety and soundness of credit union member-business lending (MBL) in a July 28 Washington Times op-ed.
“Credit unions are risk-averse due to their structure,” Nussle wrote. “As member-owned, not-for-profit, community-based financial institutions, credit unions eschew risk.”
Nussle noted that for the first 90 years of their existence, credit unions weren’t limited in business lending. “Yet an arbitrary deal two decades ago forced them to cap business loans at 12.25% of assets,” he continued. “The intent was to limit the exposure of credit unions to large commercial loans, but instead the deal has impeded credit unions from loaning to small businesses, the drivers of job growth and innovation in local communities.”
The National Credit Union Administration recently proposed a rule change to credit union member-business lending that, NCUA said, would excise prescriptive and arbitrary limits and replace them with a “broad principles-based regulatory approach.”
CUNA has said this plan would be a step in the right direction.
Meanwhile, the recently proposed H.R. 1188 would enable well-capitalized credit unions with demonstrated success in member-business lending to more fully meet small businesses’ credit needs by increasing the statutory credit union MBL cap to 27.5% of total assets, according to CUNA.
Raising the cap could result in an additional $16 billion loaned to small businesses in the first year, helping them to create more than 150,000 jobs.
Credit unions hold 6% of the business lending market, Nussle wrote. “Credit-union business loans are made in the local community and are typically focused on small businesses, churches and real-estate rentals,” he wrote. “The average credit union business loan is less than $225,000. During the financial crisis the highest loss rate was less than 1%.”