Small Credit Union Threshold Raised to $50 million After Successful Advocacy Efforts
January 10, 2013
January 10, 2013
The National Credit Union Administration (NCUA) board of directors took a major step today toward easing the regulatory burden on small credit unions by approving a final rule to amend the definition of “small entity,” raising the threshold from the current $10 million in assets to up to $50 million in assets.
The NCUA would have likely adopted the $30 million threshold at its December board meeting after only receiving a handful of comments during the initial 30-day comment period. However, Northwest Credit Union Association (NWCUA) Board Chair Debie Keesee drew attention to the fact that a $30 million asset threshold was not high enough to accurately encompass all small credit unions. She worked with the Association to extend the comment period and followed that up with a strong advocacy effort encouraging the NCUA to adopt a higher asset threshold.
Part of that effort involved working with the Association on a letter that included the results of a survey reflecting the opinion of a number of Northwest credit unions that overwhelmingly support the need for a higher asset threshold. Keesee also encouraged Mike Schenk at the Credit Union National Association (CUNA) and BECU’s Parker Cann to weigh in on the issue.
“Small credit unions are essential to their communities and fill a niche other financial institutions can’t,” NCUA Board Chairman Debbie Matz said. “So, at NCUA, we’re regularly searching for ways to help small credit unions thrive and succeed. Consistent with our Regulatory Modernization Initiative, this final rule nearly doubles the number of small credit unions receiving regulatory relief.
“This final rule is also an excellent example of how NCUA listens carefully during the rulemaking process. Last fall, we proposed a new asset threshold of less than $30 million. After reviewing the comments received, we conducted further analysis and determined that we could raise the threshold to cover credit unions with less than $50 million in assets without significantly affecting industry safety and soundness.”
The Regulatory Flexibility Act generally requires federal agencies to determine and consider the effect of proposed and final rules on small entities. Under the revised definition for a “small entity,” 2,270 more federally insured credit unions will now receive special consideration for regulatory relief. The updated threshold almost doubles the number of federally insured credit unions with regulatory exemptions through the small credit union definition. In all, the final rule covers 4,672 or 67.8 percent of federally insured credit unions.
All other provisions of the final rule remained exactly as reported last week, providing regulatory relief in several ways. First, the rule excludes more credit unions from the risk-based net worth requirements under the NCUA’s Prompt Corrective Action rule. Second, all credit unions with less than $50 million in assets will now be exempt from the requirement to adopt and implement interest rate risk policies. Finally, the NCUA Board will need to use the new threshold when issuing proposed and final rules in the future, such as the pending rule on emergency liquidity, to determine whether to exempt small credit unions from a rule’s requirements or to modify the rule to address the needs of small credit unions.
Additionally, the final rule makes more credit unions eligible for assistance from the NCUA’s Office of Small Credit Union Initiatives. The office is redesigning its service delivery system to improve efficiency and handle the potential increase in demand without increasing staff.
The final rule marks the first time in 10 years the NCUA has revised the small credit union definition. Under the final rule, NCUA will review the threshold again in two years and then every three years as part of the rolling review process of all NCUA regulations.
Matz additionally noted that the NCUA last year implemented a streamlined examination process for credit unions with less than $10 million in assets and a CAMEL rating of 1, 2 or 3. The NCUA’s Office of Examination and Insurance is studying whether to develop a modified examination program for credit unions with assets between $10 million and $50 million.
The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions on these or any regulatory issues, please contact Director of Regulatory Advocacy John Trull at email@example.com, or at 503.350.2209.