NCUA Removes Fixed Asset Cap for Federal Credit Unions

(With reporting from CUNA) Starting January 1, 2016, federal credit unions will not be subject to the current 5% cap on fixed assets. That rule, along with a final rule involving shifting the stress test and capital planning schedules, were approved by the National Credit Union Administration board Thursday.

The new fixed-assets final rule not only will remove the 5% threshold, it will also eliminate a waiver process, and establish a six-year time period for partial occupancy of premises.

“We are glad that the NCUA board heard credit union advocates from the Northwest and around the country and removed the 5% fixed-assets cap,” said John Trull, AVP of Regulatory Affairs for the NWCUA. “We are awaiting guidance on the new rule before we can understand true extent of regulatory relief.”

NCUA Chair Debbie Matz said the idea of the rule is to allow fixed-asset decisions to be made at the credit union board level, rather than at the NCUA level.  

“It’s important to remind stakeholders that an overconcentration of fixed assets can be dangerous and can have a negative impact on some credit unions,” she said. “Since 2009, high levels of fixed assets have been a primary or contributing factor in 15% of federal credit union failures. Even through credit unions now have this authority, they need to be thoughtful and diligent in how they exercise that authority.”

The final rule regarding capital planning and stress testing will adjust the timing of certain events in those cycles. Specifically, credit unions now have until May 31 to submit capital plans to the NCUA, and the NCUA must provide stress test results to credit unions by Aug. 31.

Stabilization Fund Assessments Unlikely

Speaking at the same Board meeting, NCUA Director of the Office of Examination and Insurance Larry Fazio said that future assessments for the Temporary Corporate Credit Union Stabilization Fund are unlikely. The performance of the legacy assets of five failed corporate credit unions and the NCUA Guaranteed Notes program led the agency to that conclusion, he said.

“If the latest projections hold true, there will be no need for any additional assessments, and there is an increasing likelihood of a refund for credit unions at some point in the future,” Fazio said. “This is based on point-in-time projections using the best available modeling techniques and assumptions. Actual results can vary due to changes in economic conditions and other factors.”

The stabilization fund is currently projected to conclude in 2021 with a surplus in the range of $700 million to $2.5 billion, and federally insured credit unions could receive a rebate after the fund expires.

Share Insurance Fund Stable     

The second quarter of 2015 saw continued stable trends in income and operating expenses for the Share Insurance Fund, due to continued improvement in the performance of federally insured credit unions, said the NCUA in their press release detailing the Board meeting.

More than 90% of federally insured credit union assets are in CAMEL code 1 and 2 credit unions. As of the second quarter, there were 251 CAMEL code 4 and 5 credit unions, 25 less than at the end of fiscal year 2014. Two hundred and thirty of those credit unions are below $100 million in assets.

“These numbers show that credit unions are healthy overall,” said Trull. “They continue to be the most trusted, stable financial partners for the American people.”

NCUA Revises Budget

The mid-year operating budget presented by the NCUA at its Thursday Board meeting represents a $1.3 million decrease in the agency’s adopted budget for fiscal 2015. The savings come as a result of the NCUA’s annual agency-wide mid-year review, and was presented at Thursday’s board meeting.

Savings of $2.9 million offset increases of over $1.6 million to create the reduction.

Questions about this story? Contact James Pearson: 206.340.4790,

Posted in Advocacy News, Compliance News, Federal, NCUA.