Raising the cap on member business loans would result in credit unions "straying further from their traditional mission of serving consumers…and would substantially increase the risk of exposure of credit unions," American Bankers Association President Edward L. Yingling wrote to Sen. Charles Schumer (D-N.Y.)
Schumer said last week he planned to introduce a bill on this subject because it would free up much-needed capital for small businesses.
But Yingling noted that credit unions and the federal and state agencies that regulate them "have little track record in evaluating the type of risks involved in commercial lending."
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He added that credit unions already have "significant capacity" to make small business loans and some credit unions are making large commercial loans. He cited the financial problems that some credit unions have had as a result of bad business loans.
CUNA and NAFCU have long backed lifting the cap-which Congress set at 12.25% of all assets in 1998–and said doing so would free up about $10 billion in additional capital.
Yingling wrote the letter to Schumer on Monday and the ABA released it today.
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