Pub. 5 2015 Issue 4

T H E NATIONAL CREDIT UNION AD- MINISTRATION’S LATEST PLAN TO LOOSEN THE REINS ON CREDIT UNIONS AND ALLOW THEM TO veer further from their mission has bankers seeing red. The regulatory end- run would give the already tax-exempt $1 trillion industry new and potentially risky lending powers. It’s an audacious proposal that must be stopped—and you can help. First, some background. Acting as cheerleader instead of credit union supervisor, the National Credit Union Administration (NCUA) in June issued a proposal that grants the credit union industry’s wishes for increased business lending authority. Specifically, the pro- posal would: • Widen loopholes to the member business lending cap by “clarify- ing” that non-member business loan participations do not count toward the statutory cap and by eliminating regulatory oversight of the concentrations of these loans. • Make the statutory cap meaning- less by allowing certain credit unions to exceed the member business loan statutory authority. In fact, if both the proposed busi- ness lending and pending capital rules are adopted as proposed, the statutory cap could nearly double without any congressional approval. • Remove important safety-and- soundness checks and balances by, for instance, eliminating the requirement that borrowers pledge personal assets—along with business assets—as collateral for new business loans. Such a relaxation of standards makes the industry’s insurance fund vulnerable and leaves taxpayers holding the bag should anything go wrong. Indeed, the NCUA has failed to prove that it is ready or able to supervise institutions with ma- jor business loan portfolios. A quick look at credit unions’ track record on business lending raises serious concerns about whether they, or their reg- ulator, are equipped to handle these loans. Since 2010, at least five credit unions have failed because of poorly run business loan programs. These failures accounted for a quarter of all losses to the insurance fund over that period. It’s a situation that does little to instill confidence in broadening credit unions’ commercial lending author- ity. All of this should concern not only bankers but also Congress. When Con- gress last weighed in on whether and how much credit unions should be lending to businesses, it voted for less, not more. In fact, the 1998 law that restricted member business loans to 12.25 percent of assets emphasized that credit unions should focus on consumer lending in order to remain true to their mission. Since then, credit unions have repeatedly implored Congress to change the rules, and law- makers have declined to do so. Bankers had a lot—in fact, every- thing—to do with frustrating credit unions’ ambitions in Congress. Every time they pushed for a member business lending bill, you pushed back harder. You helped make clear to Congress that such a bill would be unacceptable to the nation’s community banks. Now we must do it again. ABA and the state associations mounted a major grassroots letter-writing campaign in August that resulted in an outpouring of banker comment letters to NCUA on the proposal. The letters may not persuade NCUA, but they will slow down the pro- cess. That gives us time to bring Congress into the debate. If you are facing unfair and unbridled credit union competition, write to your lawmakers today. (And if you aren’t, write anyway—because it’s just a matter of time before an aggressive credit union enters your market.) Let lawmakers know how the unlevel playing field between com- munity banks and tax-subsidized credit unions is harming your ability to serve your customers. Unfortunately, the NCUA’s business lending proposal is only the beginning. The agency already has announced that it has an expanded field-of-membership rule and a secondary capital proposal in the works as well. This rulemaking trifecta, which could seriously undermine bank competitive- ness, puts NCUA in “captive regulator” territory, and it must be answered. The agency must be reminded not only of credit unions’ mission but also of its own: to ensure a safe and sound credit union system. w Reach Frank Keating at keating@aba.com. © 2015 American Bankers Association. All rights reserved. Reprinted with permission. Washington Update THEDANGERSOFACAPTIVEREGULATOR FRANK KEATING , Immediate Past President & CEO, American Bankers Association 19 FALL 2015