Another banking crisis possibly triggered by commercial real estate valuations and bank defaults and failures may do even more damage to credit access for small businesses.
That's according to CUNA Mutual Group Chief Economist Dave Colby who, while optimistic that there are signs of economic improvement, said "a self-sustaining recovery is not a sure bet."
Colby said his biggest concerns for this year are the availability of credit to small- and medium-sized businesses and a second banking crisis. Defaults at regional banks and community bank failures coupled with a commercial real estate market shakeup may lay the groundwork for that crisis.
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"The primary driver of a sustainable recovery will be several months of net job creation," Colby wrote in CUNA Mutual's March Credit Union Trends Report. "The census will add temporary jobs near-term as will 2010 fiscal stimulus spending. The real test will be private sector payroll gains late in the year."
As small businesses continue to seek out credit resources, consumers may stay on track with being sensitive to interest rates and "continuing with their balance sheet repair for loans and deposits."
"I expect credit unions to move cautiously in 2010, focused on generating positive bottom lines and improving capital levels," Colby said. "Growth will be a secondary issue. It is highly unlikely consumers will lead this recovery."
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