While they understand that the downturn has led lenders to significantly scale back their business lending activity, financial regulators, including the NCUA, are urging them not to become "overly cautious."
In a Feb. 5 joint statement, the NCUA, Office of Thrift Supervision, Office of the Comptroller of the Currency and the Conference of State Bank Supervisors said they recognize that small businesses play an important role in the economy and know that some are experiencing difficulty in obtaining or renewing credit.
The statement also said financial institutions that engage in prudent small business lending after performing a comprehensive review of a borrower's financial condition "will not be subject to supervisory criticism for small business loans made on that basis."
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