ABA Warns of Dangers of Easing Rules on MBLs
WASHINGTON -- Changing the rules to make it easier for credit unions to give business loans to their members will "pose additional risk" to NCUA's Share Insurance Fund, the American Bankers Association wrote the agency in a letter filed today.
ABA Senior Economist Keith Leggett said the recent failures of several credit unions were in part the result of losses stemming from the defaults of some of their business loans. And making it easier for credit unions to give out these loans would "increase risks in areas that neither credit unions nor the NCUA have been constituted to manage effectively," he wrote.
Leggett cited NCUA data showing that delinquency rates on MBLs was 2.58% after the first quarter of 2008, a 60% increase from last year.
The NCUA asked for input on whether to lower the borrower equity requirement on construction and development loans from 25% to 20% and whether there should be a regulatory credit limit on business credit cards.