Small Business Loan Exams - Regulators Lighten Up

The National Credit Union Administration, along with federal and state banksand thrift regulators, earlier this month spread the message that financial institutionsthat comprehensively review a small business’s financial condition before lending tothat business will not be subject to overly restrictive supervisory criticism.

Recognizing that many small businesses are having issues obtaining credit, theagencies said that their examiners “will not discourage prudent small business lendingby financial institutions,” will not “criticize institutions for working in a prudentand constructive manner with small business borrowers,” and, for the most part,“will not adversely classify loans solely due to a decline in the collateral value belowthe loan balance.”

The regulators also encouraged financial institutions to look beyond “nationalmarket trends” and base their lending decisions on a borrower’s “plan for the useand repayment of borrowed funds” while maintaining “an understanding of thecompetition and local market conditions affecting the borrower’s business




From CUNA Credit Union News Watch