{ "id": "R46360", "type": "CRS Report", "typeId": "R", "number": "R46360", "active": true, "source": "CRSReports.Congress.gov, EveryCRSReport.com", "versions": [ { "summary": null, "sourceLink": "https://crsreports.congress.gov/product/details?prodcode=R46360", "source_dir": "crsreports.congress.gov", "type": "CRS Report", "formats": [ { "sha1": "644a11bec60801eed5ec8d019e66e0732078efef", "format": "PDF", "url": "https://crsreports.congress.gov/product/pdf/R/R46360/2", "filename": "files/2021-11-29_R46360_644a11bec60801eed5ec8d019e66e0732078efef.pdf" }, { "format": "HTML", "filename": "files/2021-11-29_R46360_644a11bec60801eed5ec8d019e66e0732078efef.html" } ], "title": "The Credit Union System: Developments in Lending and Prudential Risk Management", "source": "CRSReports.Congress.gov", "retrieved": "2021-12-28T04:03:34.556522", "date": "2021-11-29", "typeId": "R", "id": "R46360_2_2021-11-29", "active": true }, { "source": "EveryCRSReport.com", "id": 624952, "date": "2020-05-15", "retrieved": "2020-05-19T13:36:03.161465", "title": "The Credit Union System: Developments in Lending and Prudential Risk Management", "summary": "Credit unions make loans to their members, other credit unions, and corporate credit unions that provide financial services to individual credit unions. Historically, credit unions have faced statutory restrictions on their lending activities, including restricting lending activities to their members. Other lending restrictions include a 15% statutory loan interest rate ceiling, with some authority to operate above the cap under certain circumstances; a 15-year maturity limit on most loans (with some exceptions, such as residential mortgages); and an aggregate limit on an individual credit union\u2019s member business loan (MBL) activity (in the form of outstanding loan balances) and on the amount that can be loaned to any one member. \nCongress passed the Federal Credit Union Act of 1934 (FCU Act; 48 Stat. 1216) to create a class of federally chartered financial institutions to \u201cpromote thrift among its members and create a source of credit for provident or productive purposes.\u201d The original concept of a credit union stemmed from small lending cooperatives that not only provided a low-cost source of credit for but also promoted thriftiness among their members. Since their inception, credit unions have been granted additional lending authorities as the marketplace has evolved. Nevertheless, the credit union system still faces more restrictions than the commercial banking system.\nCredit union industry advocates argue that lifting lending restrictions to make the system more comparable with the banking system would increase borrowers\u2019 available pools of credit. Community banks, which often compete with credit unions, argue that policies such as raising the business lending cap, for example, would allow credit unions to expand beyond their congressionally mandated mission and could pose a threat to financial stability. By amending the FCU Act several times to expand permissible lending activities, Congress arguably recognizes that the credit union system has evolved into a more sophisticated financial intermediation system. In addition to various FCU Act amendments over the past several decades, Congress has recently passed various legislation that would allow credit unions to expand their lending activities. For example, P.L. 115-174 revised the MBL definition, allowing credit unions to extend loans to one-to-four family dwellings regardless of whether the dwellings are primary residences. In the 116th Congress, H.R. 1661 has been introduced and, if enacted, would amend the FCU Act to allow the National Credit Union Administration (NCUA)\u2014the primary regulator of federally insured credit unions\u2014the flexibility to extend loan maturities for all loans, including MBLs and student loans. \nRecognizing credit unions\u2019 primary mission as meeting consumers\u2019 credit and savings needs, Congress emphasized prudential safety and soundness concerns when it established the statutory cap on MBLs and a capital supervisory framework for the credit union system. Following the 2008 financial crisis, the federal bank prudential regulators (i.e., the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation) enhanced their prudential capital requirements to increase the U.S. banking system\u2019s resilience to systemic risk events. Likewise, the NCUA initially proposed in 2014 to increase capital (net worth) requirements particularly for large credit unions (those with $500 million or more in assets); however, the proposal has been revised and delayed and is currently scheduled to become effective in January 2022. In the meantime, the NCUA has implemented and proposed rules to support expanding lending activities that would increase financial transactions volumes (economies of scale), thus increasing the array of loan product offerings for members and potential revenues for the credit union system. Likewise, Congress has been monitoring the extent to which the adoption of enhanced prudential capital requirements for the credit union system has kept pace with the bank prudential regulatory regime.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/R46360", "sha1": "b8e56860b0797866c6b1771de89ba8cb9e9e99cb", "filename": "files/20200515_R46360_b8e56860b0797866c6b1771de89ba8cb9e9e99cb.html", "images": {} }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/R46360", "sha1": "92cde11c82c015a5046d892ad72e33827d8de12a", "filename": "files/20200515_R46360_92cde11c82c015a5046d892ad72e33827d8de12a.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4870, "name": "Banking" } ] } ], "topics": [ "Economic Policy" ] }