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National Credit Union Administration
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Web Address: http://www.ncua.gov/

Media Contact:
Julie Starnes
Phone: (703) 518-6313
Fax: (703) 518-6346
Email: jstarnes@ncua.gov

NCUA News Release
FOR IMMEDIATE RELEASE

Vice Chair Johnson Unveils Proposed
Member Business Lending Enhancements

February 25, 2003, Washington, D.C. – National Credit Union Administration (NCUA) Vice Chair JoAnn Johnson unveiled three of the more substantive areas her member business loan regulation proposal will address while speaking to the Credit Union National Association’s Governmental Affairs Conference here today.

NCUA’s vice chair acknowledged the diligent work of her internal working group for providing recommended improvements to the rule that remain within the letter of the law while preserving safety and soundness expectations. Johnson expects the proposed member business loan regulation to come before the full NCUA Board at its March 27 meeting.

Johnson’s proposal, among other things, will:

    1. Exclude the purchase of a business loan participation interest from the calculation of a purchasing credit union's aggregate member business loan limit and will clarify that loans sold without recourse will not count as member business loans;
    2. Exempt member business vehicle loans from the 80 percent loan-to value-requirement, thereby allowing for 100 percent financing for these business-purpose vehicle loans similar to consumer car loans; and
    3. Extend the standard prompt corrective action risk-based net worth component that presently divides the portfolio of member business loans by a single threshold of 12 ¼ percent to three tiers. The bottom tier, risk weighted at 6 percent, would consist of the amount of member business loans less than or equal to 15 percent of total assets. The middle tier, risk-weighed at 8 percent, would consist of the amount of member business loans greater than 15 percent but less than or equal to 25 percent of total assets. The top tier, risk weighted at 14 percent, would consist of the amount of member business loans in excess of 25 percent of total assets.

Updating NCUA’s member business loan regulations while remaining within the bounds of the law and safety and soundness will provide credit unions additional opportunities to support America’s small businesses, Johnson said, an effort aligned with President George W. Bush’s plan to strengthen small businesses by encouraging entrepreneurship, accelerating economic growth and generating new jobs for American workers.

“President Bush is committed to creating an environment where small businesses can flourish. Credit unions are a perfect ally to assist small businesses with their financing and deposit services needs,” said Johnson. “With a focus on members’ small business lending, credit unions can play a pivotal role in helping to reinvigorate the U.S. economy.”

Johnson’s announcement today comes on the heels of the Small Business Administration’s recently issued legal opinion to authorize all credit unions to apply for participation in the 7(a) guaranteed loan program.

President George W. Bush nominated JoAnn Johnson to a seat on the NCUA Board and the U.S. Senate confirmed her nomination March 22, 2002. Johnson was elected to the Iowa Senate in 1994 where she chaired the Senate Ways and Means Committee and the Senate Commerce Committee. Johnson’s term on the NCUA Board will expire in August 2007.

The National Credit Union Administration, governed by a three-member board appointed by the President and confirmed by the Senate, is the independent federal agency that regulates, charters and supervises federal credit unions.  NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 80 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.

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NOTE TO THE MEDIA:  A complete transcript of Vice Chair JoAnn Johnson's speech to the Credit Union National Association's Governmental Affairs Conference is available at www.ncua.gov/news/speeches/speeches_johnson.html.   Photos are available by contacting Molly Schar at 703-518-6338 or mschar@ncua.gov.