26 Hoosier Banker October 2015 About the Author Frank Keating was named president and chief executive officer of the American Bankers Association in 2011. His appointment followed seven years of service as president and CEO of the American Council of Life Insurers and after serving two terms as governor of Oklahoma. Keating’s 30-year career in law enforcement and public service included stints as an FBI agent, U.S. attorney and state prosecutor, and Oklahoma House and Senate member. Author of three award-winning children’s biographies, he earned an undergraduate degree from Georgetown University, a law degree from the University of Oklahoma and is the recipient of five honorary degrees. The author can be reached at: fkeating@aba.com. FEATURE The latest plan of the National Credit Union Administration to loosen the reins on credit unions and allow them to veer further from their mission has bankers seeing red. The regulatory end-run would give the already tax-exempt $1 trillion industry new and potentially risky lending powers. It’s an audacious proposal that must be stopped ‒ and you can help. First, some background. Acting as cheerleader instead of credit union supervisor, NCUA in June issued a proposal that grants the credit union industry’s wishes for increased business lending authority. Specifically the proposal would: • Widen loopholes to the member business lending cap by “clarifying” that nonmember business loan participations do not count toward the statutory cap and by eliminating regulatory oversight of the concentrations of these loans. • Make the statutory cap meaningless by allowing certain credit unions to exceed the member business loan statutory authority. In fact if both the proposed business lending and pending capital rules are adopted as proposed, the statutory cap could nearly double without any congressional approval. • Remove important safety-andsoundness checks and balances by, for instance, eliminating the requirement that borrowers pledge personal assets – along with business assets ‒ as collateral for new business loans. Such a relaxation of standards makes the industry’s insurance fund vulnerable and leaves taxpayers holding the bag should anything go wrong. Indeed NCUA has failed to prove that it is ready or able to supervise institutions with major business loan portfolios. A quick look at credit unions’ track record on business lending raises serious concerns about whether they, or their regulator, are equipped to handle these loans. Since 2010 at least five credit unions have failed because of poorly run business loan programs. These failures accounted for a quarter of all losses to the insurance fund over that period. It’s a situation that does little to instill confidence in broadening credit unions’ commercial lending authority. All of this should concern not only bankers, but Congress, too. When Congress last weighed in on whether and how much credit unions should be lending to businesses, it voted for less, not more. In fact the 1998 law that restricted member business loans to 12.25 percent of assets emphasized that credit unions should focus on consumer lending in order to remain true to their mission. Since then, credit unions have repeatedly implored Congress to change the rules, and lawmakers have declined to do so. Bankers had a lot ‒ in fact, everything ‒ to do with frustrating credit unions’ ambitions in Congress. Every time credit unions pushed for a member business lending bill, you pushed back harder. You helped The Dangers of a Captive Regulator
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