NCUA Proposes Raising Small Entity Threshold to $100 Million
February 24, 2015
February 23, 2015
The NCUA issued a proposal Thursday that would update the “small entity” definition to include credit unions with assets of less than $100 million. The current threshold defines a small credit union as one with assets of less than $50 million. That standard was set by the NCUA board in 2013, at which time the agency said it would be revisited in two years.
“I strongly support the NCUA’s proposed change to define a small credit union as a credit union under $100 million,” said Amy Nelson, president and CEO of Point West Credit Union, which has $91 million in assets. “The regulatory burdens we face are a productivity and creativity drag on our ability to grow. Exemption from the liquidity rule and the IRR rule will provide much-needed regulatory relief — although, I believe credit unions need to be around $250 million to truly achieve an economy of scale commensurate with the regulatory burden.”
The Regulatory Flexibility Act (RFA) generally requires federal agencies to determine and consider the impact of proposed and final rules on institutions defined as “small entities.” NCUA Chair Debbie Matz said the proposal will provide regulatory relief for more credit unions in future rulemakings.
“Wherever possible, the NCUA should attempt to relieve the regulatory burden on all credit unions without affecting safety and soundness,” Matz said. “That’s why we’ve scaled our rules to target larger credit unions.”
According to the NCUA, this change would allow an additional 745 federally insured credit unions to be defined as small entities, bringing the total number of federally insured credit unions covered by the RFA to 4,869.
All three NCUA board members voted their approval of the proposal, but board member J. Mark McWatters said he was in favor of a small entity definition of no lower than $250 million in assets, and said he would support a threshold of $550 million in assets.
“By comparison, the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Federal Reserve Board each use the Small Business Administration’s asset threshold of $550 million for determining ‘small entity’ status under the RFA,” McWatters said. “Credit unions with assets of less than $250 million — and, preferably, $550 million — also merit the regulatory relief noted above that follows a ‘small entity’ designation under the RFA.”
Vice Chair Rick Metsger said while he supports the staff recommendation, adjusting the threshold to more than $100 million could make it harder for smaller credit unions to receive assistance from the NCUA’s Office of Small Credit Union Initiatives (OSCUI).
“It is very important as we consider rules going forward, and how they impact small credit unions, we don’t want to dilute the impact of those rules,” he said. “If there is an impact, we don’t want it clouded by higher-performing credit unions.”
“One thing to consider regarding the change in the definition of a small credit union for RFA purposes is that the regulatory analysis of a rule is looked at in the aggregate,” said John Trull, director of regulatory affairs for the NWCUA, “and the reality is that credit unions under $250 million face significant regulatory hurdles, which create a competitive disadvantage.”
CUNA maintains a much higher threshold of $500 million would be appropriate for purposes of reduced regulatory burden. CUNA supports providing regulatory flexibility under the RFA to as many credit unions as possible while targeting the assistance offered by OSCUI to a more limited number of smaller credit unions.
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