The Small Business Administration wants the federal banking agencies to expand safety-and-soundness exams to include a review of 7(a) program loans.
The pitch was disclosed in a recent General Accounting Office report that criticized the agency for failing to conduct on-site reviews of lenders involved in the 7(a) program, which guarantees up to 80% of loans to small businesses that otherwise could not qualify for credit. About 6,000 lenders participate in the program, but 450 firms were responsible for half of the $9.5 billion in credit extended in fiscal year 1997.
"Instead of concentrating on an on-site review by SBA employees of each of these lenders, I want to leverage the work of the financial regulatory agencies, who are already performing examinations of the vast majority of these lenders," SBA Administrator Aida Alvarez wrote to GAO investigators.
The Federal Financial Institutions Examination Council has agreed to help the SBA create a risk-based exam for 7(a) program loans, but no decision has been made on whether the banking agencies would conduct these reviews.
The GAO found little supervision of lenders in the five SBA districts it reviewed. "Without such systematic oversight, SBA cannot ensure that participating lenders are complying with its loan standards and thereby mitigating risks to the agency," the GAO said in the report, which was released late last month.
In a separate report, the GAO praised the Financial Crimes Enforcement Network, the Treasury Department branch charged with fighting money laundering.
More than 95% of federal and state law enforcement officials surveyed by the GAO found Fincen's tactical products and services-such as its financial analyses of criminal organizations-to be helpful.
In addition, Fincen's financial and commercial data bases-including its on-line data base of Bank Secrecy Act records-have received substantially more use in recent years, the GAO found. But the report said Fincen has not adequately monitored the data bases for possible misuse.
Fincen also has been producing fewer written reports in recent years. The volume of strategic reports-such as those on trends in currency flows to and from Federal Reserve banks-fell from 23 in 1992 to one in 1997, and the number of tactical reports and reports based on artificial intelligence also declined.
