CUNA Urges Senate Banking to Reject Reg Relief Compromise
Calls House proffer ‘unacceptable to credit unions;’ notes thrift biz lending expansion

June 21, 2006

FOR IMMEDIATE RELEASE
Contact:
Patrick Keefe, CUNA Communications
(202) 508-6765
pkeefe@cuna.com

WASHINGTON – Calling the proposed compromise "unacceptable to credit unions," CUNA has urged the Senate Banking Committee to reject an initial House compromise on financial institution Reg Relief legislation (S. 2856).

In a letter, CUNA President and CEO Dan Mica pointed to Section 212 of the proposed House “proffer” to the Senate on the bill, which would completely eliminate the current limitation on business lending by thrift institutions of 20 percent of assets.

The proffer is silent on credit union limitations on small business lending, which is capped at a much more restrictive 12.25 percent of assets limitation.

Accepting the thrift change, Mica wrote, "would severely damage the tenuous balance between federal thrift and credit union charters without comparable and offsetting benefits for credit unions either in the proposed compromise or in the broader Senate legislation."

The CUNA letter was sent to Senate Banking Committee Chairman Richard Shelby, R-Ala.; Ranking Member Paul Sarbanes (D-Md.), and bill sponsor Sen. Mike Crapo (R-Idaho).

CUNA pointed out that it has for several years been urging, on behalf of credit unions, “a modest increase” to credit union business lending limitations, which were imposed in 1998. But those suggestions, CUNA noted, have encountered “strong opposition from the banks.”

“Therefore, we view it as inappropriate for Congress to consider a substantial expansion in thrift business lending, and a significant enhancement of the thrift charter, within the context of Senate legislation that was intentionally drafted to avoid any disruption of the delicate balance between federal charters and regulators,” Mica wrote.

CUNA also pointed out that the proposed removal of all restrictions on business lending for thrifts is further inappropriate given there is no evidence of the need for such a radical change.

“Thrift commercial and industrial lending accounts for a small percentage, 3.6 percent, of total thrift industry assets,” Mica told the Senate Banking Committee leaders. “Fewer than 10 percent of thrift institutions have more than 10 percent of assets in commercial loans, and most of those institutions have less than 15 percent of assets in such loans.”

Mica noted that, in contrast, the credit union small business lending cap of 12.25 percent of assets is, by its very nature, “far more binding and discouraging of new small business lending. The desire to expand business lending to members is among the top reasons cited for recent credit union conversions to mutual thrift charters.”

In sending the letter, CUNA’s Mica said: “In my 10 years of leading CUNA, it has been our policy not to oppose any legislative or regulatory request by the bank and thrift industries to enhance their ability to serve their customers. The same courtesy has not been extended to credit unions by bank and thrift industry groups.”

Following is the complete text of CUNA’s letter to the Senate Banking Committee leaders:

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June 20, 2006

Sen. Richard C. Shelby
Chairman
Committee on Banking, Housing and Urban Affairs
Room 534, Dirksen Senate Office Building

Sen. Paul S. Sarbanes
Ranking Member
Committee on Banking, Housing and Urban Affairs
Room 534, Dirksen Senate Office Building

Sen. Mike Crapo
Chairman
Subcommittee on International Trade and Finance
Room 239 Dirksen Senate Office Building

Dear Senators Shelby, Sarbanes and Crapo:

It is my understanding that Financial Services Committee Chairman Mike Oxley and Ranking Member Barney Frank have transmitted to the Senate Banking Committee an initial compromise proposal to reconcile the differences between the Senate Financial Regulatory Relief Act (S. 2856) and the comparable House legislation (H.R. 3505). I am writing to express the view of the Credit Union National Association (CUNA) that, because of the proposed removal of all restrictions on small business lending by thrift institutions, we must respectfully urge the Committee to reject the initial House proffer. CUNA is the nation’s largest credit union advocacy organization, representing roughly 90 percent of our nation’s 8,800 credit unions and their 89 million members.

While I commend Chairman Oxley and Representative Frank for attempting to bridge the significant differences between the Senate and House bills, their inclusion of Section 212 among the nine House bill sections to be added to S. 2856 makes the proposed compromise unacceptable to credit unions. Section 212 would eliminate the current 20 percente of assets limitation on business lending by thrift institutions while leaving a more restrictive 12.25 percent of assets limitation on small business lending by credit unions. This would severely damage the tenuous balance between federal thrift and credit union charters without comparable and offsetting benefits for credit unions either in the proposed compromise or in the broader Senate legislation.

It has been CUNA’s long-standing policy not to oppose any legislative or regulatory request by the bank and thrift industries to enhance their ability to serve their customers. Unfortunately, the same courtesy has not been extended to credit unions by bank and thrift industry groups. CUNA has attempted for several years to obtain a modest increase in the 1998 limitation on credit union business lending, encountering strong opposition from the banks. Therefore, we view it as inappropriate for Congress to consider a substantial expansion in thrift business lending, and a significant enhancement of the thrift charter, within the context of Senate legislation that was intentionally drafted to avoid any disruption of the delicate balance between federal charters and regulators.

CUNA also considers it inappropriate, and contrary to the intent of the Senate legislation, to remove all restrictions on small business lending by thrift institutions in the absence of evidence showing need for such a change. Thrift commercial and industrial lending accounts for a small percentage, 3.6 percent, of total thrift industry assets. Fewer than 10 percent of thrift institutions have more than 10 percent of assets in commercial loans, and most of those institutions have less than 15 percent of assets in such loans. In contrast, the credit union small business lending cap of 12.25 percent of assets is, by its very nature, far more binding and discouraging of new small business lending. The desire to expand business lending to members is among the top reasons cited for recent credit union conversions to mutual thrift charters.

CUNA does not oppose efforts by the thrift or banking industries to remove unnecessary or burdensome restrictions on business lending. However, we believe that the policy ramifications of such proposals need to be addressed in a more comprehensive fashion that takes into account the distinctive role and needs of all market participants. We would welcome any opportunity to work with the Banking Committee to improve the market for small business loans to benefit all potential lenders and borrowers.

Sincerely,

Daniel A. Mica
President & CEO

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