The NCUA will strengthen its regulations to prevent "unintendedsafety and soundness concerns," if Congress raises or eliminatesthe cap on member business lending, NCUA Chairman Debbie Matz wroteTreasury Secretary Timothy Geithner.

She said the changes would only allow credit unions to increasetheir business lending capacities "on a gradual basis" and theagency would adopt a "tiered approval process."

Matz noted that the agency had "long exercised caution" in thisarea and has made certain that business lending programs arelimited to products consistent with the capabilities of a creditunion's staff and "the principles of sound risk management."

She wrote the letter, which was sent yesterday and releasedtoday, at a time when the credit union trade associations arepushing hard to have Congress enact legislation to raise the MBLcap from 12.25% of assets to 25% of assets. The Obamaadministration hasn't taken a position on the bills yet.

When asked about the issue at a House Financial ServicesCommittee hearing yesterday, Federal Reserve Chairman Ben Bernankesaid that in exchange for their tax-exempt status, credit unionshave certain restrictions placed on their activities, includinglimits on member business lending.