Why Are Bankers Irate?
This past week I introduced my oldest daughter to the great American tradition of voluntary homelessness called camping. I’m not quite ready to take her canoeing in the Adirondacks as my father did with me so instead, armed with the barest of essentials-fully charged IPhones and a six-pack for dad-I settled for a beautiful spot called Thompson’s lake. The weather was beautiful and we had a great time hiking and kayaking but I couldn’t escape the feeling that I was willingly helping to populate a Shanty Town, albeit one with Priuses, Pilots and pickup trucks waiting to take their owners back to civilization.
Having spent time immersed in this tableau of Americana I am now more prepared than ever to respond to the latest knee jerk banker attacks on MBL lending. According to this morning’s American Banker “Irate Bankers” have Flooded NCUA with letters opposing NCUA’s MBL plan. According to NCUA the large majority of comment letters express opposition to the proposal.
What has the Bankers so hopping mad is NCUA’s proposal to amend its MBL regulations to replace the existing overly prescriptive MBL regime with one in which credit unions would have greater flexibility to create MBL programs that reflect the unique needs of their membership. Lest there be any confusion, credit unions aren’t allowed to do what they want. They would have to create a detailed set of policies that address all of the areas covered by existing regulations and supervisory guidance would be used by examiners to judge the effectiveness of these programs. Plus an MBL cap would still be in place.
I’m a little confused by the Bankers’ lines of argument.
I thought banks were being strangled by excessive regulations? They should be supportive of NCUA’s efforts and point out to their own regulators that regulations shouldn’t be judged by how detailed they are but by how effectively they further safety and efficiency.
Instead, according to the American Bankers Association’s comment letter, the amendments set forth in this proposal will lead to safety and soundness concerns as business lending regulations become increasingly lax and increased commercial lending becomes more appealing to the credit union industry.
Really? Never mind the fact that examiners may very well end up having more not less power to regulate individual credit unions. By replacing prescriptive rules with guidance credit unions won’t be able to evade potentially legitimate supervisory concerns by complying with the specific requirements of a given regulation. In fact, it’s possible that some credit unions might find this new MBL approach overly restrictive. Also every major issue covered currently in regulation will have to be addressed in policy.
The Bankers are concerned that the amendments use a “loophole” to expand credit union lending authority. Existing regulations cap MBL loans at 12.25 percent of a credit union’s total assets. If by a loophole the bankers mean that NCUA has the audacity to adopt the plain language of federal law than they have a point. Federal law says nothing about limiting credit union MBL loans to 12.25 percent. Instead it limits the aggregate amount of MBLs that a credit union may make to the lesser of 1.75 times the actual net worth of the credit union or 1.75 times the minimum net worth required under the FCU Act for a credit union to be well capitalized. Nothing NCUA is proposing goes beyond this Congressional mandate.
The backing industry loves to hide behind community and independent banks when it fits their purposes. Its real concern, of course, has precious little to do with safety and soundness but maintaining as many lending roadblocks as they can.
The problem is that small businesses need loans and the economy has plenty pf room to grow and many small businesses have complained that they aren’t getting access to loans. The ultimate goal of banking regulations should be to make life easier for Americans, not perpetuate banker monopolies. It’s sad that the banks have nothing better to do with their time than keep credit unions from helping consumers.