CUNA highlights CU impact on capital formation for hearing record

April 30, 2015

WASHINGTON (4/30/15)--Credit unions stand ready to advance economic improvements for their members, CUNA President/CEO Jim Nussle told members of the U.S. House in a letter sent Wednesday.

The letter was sent for the record of a House Financial Services subcommittee on capital markets and government sponsored enterprises hearing dealing with legislative proposals to enhance capital formation and reduce regulatory burdens.

"Credit unions exist to promote thrift and provide access to credit to their members," Nussle wrote. "Ensuring our small businesses have access to the capital they need so they can meet customer demand and grow their businesses is a priority for credit unions; in fact, it is central to the mission Congress has given credit unions."

Nussle highlighted credit unions' role in the economy, "in good times and bad," demonstrating how credit unions increased lending during the financial crisis, all while banks pulled back their lending activities.

Nussle also outlined a number of ways reducing regulatory burden on credit unions can help increase capital formation in the letter. These include:

  • Allowing credit unions to lend beyond the 12.25% of assets cap on member business lending. Nussle pointed out that many credit unions are rapidly approaching the cap, while others choose not to engage in business lending within their communities because of the cap. CUNA's research suggests that expanding the cap to 27.5% of assets could result in an additional $16 billion to small businesses in the first year, helping to create more than 150,000 new jobs;
  • Changing the policy that credit union loans for one one- to four-unit non-owner occupied residential properties are classified as member business loans, thus counting against the cap. The same loans made by banks are counted as residential. Nussle said changing this policy would spur additional investment in affordable rental properties; and
  • Allowing credit unions to raise capital through others ways than retained earnings. Nussle said that if credit unions has the operational flexibility to meet capital demands through supplemental capital they could serve more members and small businesses through more efficient capital deployment.