ARLINGTON, Va. -- While it supports the Small Business Administration's efforts to improve oversight of the agency's lending programs, NAFCU said it has concerns with several aspects of the SBA Lender Risk Rating System.

At issue is SBA's proposal that would codify in the agency's regulations SBA's process of risk-based oversight including accounting and reporting requirements, off-site reviews and monitoring, on-site reviews and examinations, and capital adequacy requirements.

Credit unions and other financial institutions are already subject to "strictly enforced" regulatory requirements aimed at ensuring safety and soundness, and capital adequacy, wrote Dan Berger, senior vice president of government affairs at NAFCU, in a Jan. 29 comment letter to SBA.

SBA is also proposing to incorporate the Lender Risk Rating System that would assess the risk of 7(a) lenders and certified development companies' loan operations and portfolios into the agency's regulations. NAFCU said it is concerned that peer group analysis based wholly on portfolio size may not allow for a fair comparison in certain circumstances.

NAFCU also took issue with SBA's composite rating model, which ranks lender on a scale of 1 to 5 (best to worst) based on the lender's portfolio performance saying "greater transparency" about the model is needed.