Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
National Credit Union Administration
Office of the Comptroller of the Currency
Office of Thrift Supervision
Conference of State Bank Supervisors
For Immediate Release
February 5, 2010
Regulators Issue Statement on Lending to Creditworthy Small Businesses
The federal financial regulatory agencies and the Conference of State Bank Supervisors (the regulators) issued a statement today on prudent lending to creditworthy small business borrowers.1 The regulators recognize that small businesses play an important role in the economy and know that some are experiencing difficulty in obtaining or renewing credit.
The statement emphasizes that financial institutions that engage in prudent small business lending after performing a comprehensive review of a borrower's financial condition will not be subject to supervisory criticism for small business loans made on that basis. Financial institutions should understand the long-term viability of the borrower's business and focus on the strength of a borrowers' business plan to manage risk rather than using portfolio management models that rely primarily on general inputs, such as a borrower's geographic location or industry.
The regulators are working with the industry and supervisory staff to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to sound small business borrowers. The statement builds upon principles in existing guidance, including the Interagency Statement on Meeting the Needs of Creditworthy Borrowers2 issued in November 2008 and the Policy Statement on Prudent Commercial Real Estate Loan Workouts3 issued in October 2009.
1 Financial institutions should apply the principles of this statement in accordance with their internal definitions of small business loans or as appropriate in their loan portfolios. Small business lending includes loans to small businesses and farms, such as working capital lines of credit, secured and unsecured term loans, as well as unsecured revolving credit.