FAQ Regulatory Issues concerning the State Small Business Credit Initiative

How will the OCC view loans that are made as part of the State Small Business Credit Initiative? Will the OCC place additional or unnecessary scrutiny on banks participating in SSBCI programs? 

The OCC recognizes the important role that small businesses play to the economies of the states and our nation as a whole. We support national banks and federal savings associations who participate in SSBCI and other innovative programs that can assist them in meeting the credit needs of small business owners in a prudent and safe manner. In February 2010, the OCC and other federal banking agencies and Conference of State Bank Supervisors issued the Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers (see OCC Bulletin 2010-6). 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. Consistent with this statement, a bank's participation in the SSBCI program would not, by itself, prompt OCC examiners to subject a national bank or federal savings association to increased supervisory scrutiny. Bankers must continue to conduct sufficient due diligence in evaluating borrowers and underwriting loans that are made under this program. We would also expect national banks and federal savings associations to ensure that their participation in this and similar programs is consistent with, and support their institution's overall strategic goals and objectives. Examiners would consider and evaluate this due diligence process as part of their normal safety and soundness examinations. 

Does the SSBCI program encourage banks to make riskier loans? 

Under the State Small Business Credit Initiative, participating states will use the federal funds for programs that leverage private lending to help finance small businesses and manufacturers that are creditworthy, but are not getting the loans they need to expand and create jobs. Bankers must continue to conduct sufficient due diligence in evaluating borrowers and underwriting loans that are made under this program. 

For example, a bank may be considering a loan to an otherwise credit worthy borrower that has a collateral shortfall due to declines in real estate values. Participation in a SSBCI-funded collateral support program could bring that loan into policy, lessening the risk to the bank. 

Can banks with a regulatory enforcement action participate in the SSBCI program? 

All banks with a regulatory enforcement action should discuss their participation in the SSBCI program with their examiner. 

Are loans made through the SSBCI eligible for CRA consideration? 

Loans made to businesses through the SSBCI program will generally be considered as small business loans and as such would be evaluated under the lending test. Banks that are evaluated using examination procedures for intermediate small banks may choose to have business loans that also have a primary purpose of community development considered under the community development test instead of the lending test. 

Regulatory references: 

12 CFR 25.21(v) Definition of “small business loan” 

Interagency Questions and Answers on Community Reinvestment (Q&As), questions 1 through 4 under §__.12(v) Small business loans