In 2011, NCUA Chairman Debbie Matz stated that credit unions that wanted expanded business lending authority needed to crawl before they walk.
NCUA Chairman Matz during her testimony regarding raising the member business loan (MBL) cap before the Senate Banking Committee on June 16, 2011 stated in response to a question that the agency would put in place regulations "to ensure that ... the credit unions that go above the cap do so in a moderate way, that they crawl before they walk."
However, last year NCUA significantly expanded the number of credit unions that had an exception to the MBL cap by streamlining the process for credit unions to receive a low-income designation. The only thing a credit union needs to do is opt-in when notified by NCUA that they qualified for this designation.
One benefit associated with accepting this low-income credit union designation is that the credit union is no longer subject to the member business loan cap of 12.25 percent of assets.
NCUA reported on October 18, 2012 that 676 federal credit unions accepted the low-income designation increasing the number of low-income credit unions to 1,874. Since then, more credit unions have been designated as low-income credit unions.
But NCUA has not proposed any rules to moderate the rate of growth of business lending by low-income credit unions. These credit unions, if they wanted to, could aggressively ramp up their business lending operations.
What happened to crawling before walking?
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We were shocked to see this last year. Seems many of our peers dont "get" the risk of this decision.
ReplyDeleteHere is what happened to crawling before walking....
It's alive and well with juxtaposition.
Meaning, the strongest credit unions are going to be crawling and sooner than they think.
The entire movement loses money without fee income according to Callahan info. Almost all are not and have not been growing for years.
So who is carrying the pail of trade dues and assessments?
The bigger credit unions that generate a positive roa.
Now as you report, NCYA just thumbed their nose at Cuna and congress and said, "you're ineffectual. You ignore the needs of credit unions and are just feeding at the trough of lobby money. I, the NCYA of independent mind capable of ignoring executive order and able to leap tall corporate and unresolved npcu failures in a single bound, will now unilaterally give 1100 credit unions unlimited business lending capacity, access to secondary capital and can take deposits from non members". "pay no attention to that chetco and telesis behind the curtain".
Brings us back to the best credit unions crawling.
We are one of them. We have calculated that we have paid millions in unnecessary assessments on top of what we should have paid because the vast majority of credit unions are not growing, so we have become a larger part of the numerator.
This is money we could have lent, built or bought branches or simply paid more in dividend.
Wait til the 1100 start making business loans and issuing debt.
The potential for losses might actually eclipse what is still left on corp bonds and eventual closure of hundreds of retail credit unions.
We say all the time at our credit union, " geez, haven't ANY of the large credit unions done the math like we have? When combined with growing reputation risk, the cost of remaining a credit union is more than paying the tax."
If we get access to capital, we can grow past the tax impact. Don't see it happening though. We could get taxed and no capital!
Getting ready to crawl. It's a slow death.
HarborOne had it right.