WASHINGTON (6/17/11)—Raising the “artificially low” credit union member business lending (MBL) cap, which stands at 12.25% of assets, would increase the safety and soundness of credit unions by helping them diversify their portfolios and reducing risk concentrations, National Credit Union Administration (NCUA) Chairman Debbie Matz said during Thursday testimony before the Senate Banking Committee. The NCUA chairman testified before a committee hearing on S. 509, a bill that would increase the credit union member business lending cap to 27.5% of assets. Credit Union National Association President/CEO Bill Cheney and other credit union and bank representatives also testified during the hearing. The relatively small size of credit union business loans, and the agency’s strong underwriting standards, significantly ease any safety and soundness concerns that would accompany increased business lending authority, Matz added. The NCUA leader said that 2,200 credit unions are active in the business lending market, and only one of those credit unions failed due to issues with its business lending practices. Overall, business lending delinquencies at credit unions have declined during the last quarter, and delinquent loans held by credit unions do not always result in losses if the loans are well collateralized. It’s part of the NCUA’s job to ensure that credit unions are backing their loans with the needed collateral to avoid significant issues, Matz said. She added that the agency will make sure that credit unions that are starting up new business lending programs or are expanding their existing programs do so prudently. Matz said that her agency would soon issue a draft rule for comment on changes to its MBL regulations. The proposal will, she said, “clarify and revise a number of current provisions.” However, she urged the banking panel to increase the MBL cap for credit unions to allow small businesses to obtain “reasonably priced loans.” If legislative changes increase the current cap on member business lending, Matz indicated that NCUA would move swiftly to amend its rules and vigorously supervise the law’s implementation. For more on the hearing, use the resource links.