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NCUA’s Hood would 'certainly love' to see MBL cap eliminated

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The battle over the member business lending cap seems to be far from over.

Chairman Rodney Hood, chairman of the National Credit Union Administration, would like the MBL limit to be removed entirely, he said during the State of the Industry Summit hosted by National Association of Federally-Insured Credit Unions on Thursday.

“I would certainly love to see the cap even be erased,” Hood added during a question-and-answer session with Dan Berger, president and CEO of NAFCU.

However, Hood has requested that Congress lift the cap from its current 12.25% of total assets to at least 20%. He previously made the recommendation in a letter to Senate Banking Committee Chairman Mike Crapo, R-Idaho.

Hood said that he believes now is the right time to lift the cap since credit unions "need to be part of the solution" during the post-pandemic recovery.

“I want credit unions to be able to make business loans to those entrepreneurs," Hood said during the virtual event.

Hood’s latest comments could serve as fresh fodder for bankers who have been unhappy with the industry’s latest push to either lift or eliminate entirely the MBL cap. Bankers have claimed that credit unions are being opportunistic by seeking to remove this limit in the middle of a pandemic.

The MBL cap limits credit unions’ commercial lending to no more than 12.25% of total assets and has been in place since the late 1990s. Roughly 30 credit unions — out of more than 5,000 — are at risk of hitting the limit, according to a letter from state-level bank groups.

A House bill introduced in April would eliminate the MBL cap for three years, but that was later reduced to one year in a separate piece of legislation also introduced in the House.

The Independent Community Bankers of America previously said the group wouldn't rule out legal action against legislation that permanently expands credit unions’ MBL authority.

“ICBA and the nation's community banks will continue our long-standing opposition to increasing the cap on member business loans because it would expand government-sponsored advantages for taxpayer-subsidized credit unions and introduce new risks to the financial system," Aaron Stetter, ICBA’s executive vice president of policy and political operations, said in a statement regarding Hood's comments. "Commercial lending restrictions are intended to prevent risks at credit unions and ensure they remain focused on consumer, not business, lending."

Whether Congress grants credit unions the ability to make more MBL loans, the industry is still prepared to serve their members amid the pandemic, Hood noted. He believes that credit unions currently have the resources they need, so NCUA would not create any new programs to help at this time.

“We have a way to go until things return to normal," Hood added.

This story was updated on June 26 at 3:38 p.m.

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