Fitch Ratings believes credit unions could face significant challenges should they be allowed to make more small business loans. We believe few credit unions might successfully compete with those banks already heavily involved in the small business loan space. Limited experience could increase risk, and while increased business lending exposure might behoove credit unions in the long term, we believe it would ultimately have a measured impact on revenue.
A bill under consideration in Congress would more than double credit unions' current business lending cap of 12.25% to 27.5% of total assets. Credit unions feel an increase would allow additional access to capital for small businesses. However, we believe that in the current environment credit-worthy businesses should experience little to no difficulty securing loans in the banking sector.
Bank lobbyists disagree that loans are hard to come by, underscored by a rebound in commercial and industrial lending. In addition, banking trade groups argue that credit unions do very little business lending, highlighted by the small amount of credit unions in danger of reaching or surpassing their 12.25% limit. Credit unions are also nonprofit organizations, making them income tax exempt. Banks clearly don't enjoy that same tax benefit. And banks and credit unions are also subject to different regulators and government rules.
We feel it would be difficult for credit unions to build up viable business lending activities for several reasons. At the onset, addressing infrastructure and capability would be challenging. As part of business lending, a bank must have and relies upon adequately trained staff (which includes a business credit approval and monitoring infrastructure) and be able to provide competent business cash management services and other ancillary products. We believe smaller credit unions with limited resources might find it difficult to successfully compete in a larger business loan environment.
Fitch rates a limited number of credit unions overall and no retail credit unions. All Fitch-rated credit unions are rated on their support floor based on the level of support received from regulators and the government.
Here is the link to the press release.
Fitch? Ha ha ha! Fitch is an accomplice of the banks; thought to be a probable co-contributor to the 2008 United States Banking Crisis, as Fitch is among the Privileged Raters that over-valued bankings' mortgage securitizations, collecting fees-for-ratings from the banks that originated, pooled and sold investments with devastating ratings-disguised deficiencies. The Privileged Raters and big banking share the same bad reputation on Capitol Hill; seen as inseparable to ensure each other's profits.
ReplyDeleteA better report than Fitch, from the United Nations. It suggests US banks and their lax regulator might not be trusted with banks business lending. It came from Antonio Maria Costa, then head of the United Nations office on drugs and crime. (Recall Wells-Wachovia paid fines in 2010 for business lending and laundering more than $350 billion in drug money.) The UN and Costa shared evidence to suggest the proceeds from drugs and crime were "the only liquid investment capital" available to banks on the brink of collapse. "Inter-bank loans were funded by money that originated from the drugs trade," he said. "There were signs that some banks were rescued that way."
ReplyDeleteHow dirty do the banks want to make this fight?
I'm really hoping that this bill and other related laws would come out in favor of the consumers, and not just for the profit-making enterprise of big banks. I feel that credit unions need to help the development and growth of small businesses, because that's what will help the United States economy float. That will also help generate jobs and further capital.
ReplyDelete