The NCUA will strengthen its regulations to prevent "unintended safety and soundness concerns," if Congress raises or eliminates the cap on member business lending, NCUA Chairman Debbie Matz wrote Treasury Secretary Timothy Geithner.

She said the changes would only allow credit unions to increase their business lending capacities "on a gradual basis" and the agency would adopt a "tiered approval process."

Matz noted that the agency had "long exercised caution" in this area and has made certain that business lending programs are limited to products consistent with the capabilities of a credit union's staff and "the principles of sound risk management."

She wrote the letter, which was sent yesterday and released today, at a time when the credit union trade associations are pushing hard to have Congress enact legislation to raise the MBL cap from 12.25% of assets to 25% of assets. The Obama administration hasn't taken a position on the bills yet.

When asked about the issue at a House Financial Services Committee hearing yesterday, Federal Reserve Chairman Ben Bernanke said that in exchange for their tax-exempt status, credit unions have certain restrictions placed on their activities, including limits on member business lending.