= Subscriber content; or subscribe now to access all American Banker content.

Increasing Business Lending Cap Will Make Credit Unions TBTF


(4) Comments



Comments (4)
In line with one of the bankers' arguments for why credit unions don't need an expansion on the MBL cap, credit unions haven't charged eagerly toward their 12.25% cap over the past 14 years since it was implemented. Credit unions are easing into business lending, with the NCUA reporting just a 1.5% increase in the third quarter. And, counter to bankers' arguments, credit unions aren't particularly known for a Polar Bear Club attitude when it comes to taking risks, so they aren't diving into Arctic waters with both feet. And the TBTF argument isn't even worth rebutting since the entire industry is smaller than a each of a handful of banks. Yes Telesis (and Texans) let business loans get out of hand but another 1700 credit unions are just fine. In fact a recent report demonstrated that credit unions offering member business lending are healthier in key financial categories than non-MBL credit unions. --Sarah Snell Cooke,
Posted by scooke | Friday, November 30 2012 at 8:18AM ET
It is completely incomprehensible that at a time when we are just days away from going over the fiscal cliff that there would be any discussion whatsoever about allowing tax-exempt credit unions to take business away from tax-paying community banks. The recent conversion of Thrivent Financial Bank to a credit union in order to avoid $1.6 million each year in taxes is a travesty. It's a zero sum game folks! There is no free lunch.
Posted by tjorde | Thursday, November 29 2012 at 2:51PM ET
Contrary to the author's assertions, credit unions have been making business loans for most of the industry's history, and there was no cap on credit union business lending before 1998, when the banking lobby succeeded in getting one established. (Credit unions also do pay for deposit insurance, have capital standards, and are audited and examined.) As to the argument that the failure of a handful of credit unions due to soured business loans is a reason to restrict them, would the same rationale apply to banks, which experienced many more commercial lending-induced failures?
Posted by MrPotter | Tuesday, November 27 2012 at 5:00PM ET
The size of these large CUs pale in comparison to a good portion of U.S. banks. The credit union designation is tax beneficial and offers depositors/shareholders a unique way of banking. If they don't want to be constrained by CU requirements then we should allow CU to banks conversions to take place. Then they will have to pay FDIC insurance premiums, be held to new capital standards, auditing and the like. There's no need to up loan limits and change the risk profile for the entire industry.
Posted by @Patrick_J_Sims | Tuesday, November 27 2012 at 1:32PM ET
Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.