February 05, 2010

Regulators Issue Statement on Lending to Creditworthy Small Businesses

  • 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

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.

Attachment: Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers (38 KB PDF)



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. Return to text

2. http://www.federalreserve.gov/newsevents/press/bcreg/20081112a.htm Return to text

3. http://www.ffiec.gov/press/pr103009.htm Return to text

Media Contacts:
Federal Reserve Board Barbara Hagenbaugh 202-452-2955
FDIC David Barr 202-898-6992
OCC Dean DeBuck 202-874-5770
NCUA Cherie Umbel 703-518-6337
OTS William Ruberry 202-906-6677
CSBS Catherine Woody 202-728-5733


Last Update: February 05, 2010