Pub. 5 2017 Issue 4

4 The Community Banker www.mibonline.org President’s Address H appy New Year! Hopefully everyone had an enjoyable holiday season and 2017 is off to a great start. The MIB board had a busy fall and Jim is currently busy keeping up with the lobbying efforts for the 2017 Montana legislative session. One issue the MIB has been actively following on the national level is the lawsuit filed by the Independent Community Bankers of America (ICBA) against the National Credit Union Administration (NCUA). The lawsuit is challenging the agency’s unlawful commercial lending rule issued in March, 2016. If allowed to stand, the NCUA’s final rule would allow tax-exempt credit unions to exceed limitations on commercial lending activity established by Congress while relaxing regulatory oversight, ultimately putting consumers and the finan- cial system at risk. ICBA has asked the court to declare that NCUA acted contrary to law and acted arbi- trarily and capriciously in concluding that: (1) credit unions do not need to count purchased nonmember commercial loans and partici- pations toward the MBL limit, and (2) a credit union’s purchase of a nonmember commer- cial loan or participation does not constitute making an MBL under the FCU Act." Under the new rule a credit union can exclude nonmember commercial loans or participations from its calculation of the mem- ber business loan cap. This has provided the credit union industry with a huge loophole it can easily exploit to increase commercial lending in violation of the law. The NCUA’s rule is contrary to the Federal Credit Union Act, as amended by the Credit Union Mem- bership Access Act. These laws expressly limit the amount of commercial loans that may be held on credit union balance sheets and clearly define “member business loan” as any commercial loan. NCUA has not offered any rational explanation for its interpretation, which reverses the conclusion it reached more than 15 years ago that such an expansion in lending would lead to “absurd” results and violate the FCU Act. ICBA filed the lawsuit to force the agency to adhere to the law when writing rules. The laws are put into place to protect consumers, taxpayers and the financial system. The new rule is jeopardizing the safety and soundness of federally-insured credit unions. It also expands the federally-funded competitive advantages these tax-exempt institutions enjoy over community banks. NCUA is also considering a separate field-of-membership proposed rule exemplifying its lax and ques- tionable approach to credit union oversight. That rule would significantly expand the definition of “well-defined local community,” which by law limits the territory a communi- ty-based credit union can serve, to include any congressional district. This means the entire territory of each of seven states would qualify as “local. “ICBA and the nation’s roughly 6,000 community banks believe that the credit union industry should not be allowed to continue expanding its lending authority as long as it remains exempt from taxation and the federal financial regulations that taxpay- ing community banks are obligated to meet,” ICBA President & CEO Cam Fine stated last September. MIB's board of directors strongly agrees with ICBA’s opinion that not only are the new rules putting the safety and soundness of the industry in jeopardy, they are also giving cred- it unions an unfair advantage over community banks. Community in banks in Montana and across the nation continually face an uphill battle fighting off increased regulation and the associated costs. The new rules imple- mented by the NCUA make it even more difficult to continue to be competitive as com- munity banks. To help support the efforts of ICBA and continue to support community banking in Montana, MIB last fall contribut- ed $5,000 to ICBA's legal fund. You can also contribute to the ICBA Credit Union Litigation Fund by going to http://www.icba.biz/stopc- ugrab/Pages/contribute.aspx. Our thanks to ICBA for taking this fight up on our behalf. Amy Quarles, MIB President 2015-2017 and CFO of First Security Bank of Helena Amy Quarles