September 20, 2012
As part of this morning’s board meeting, the National Credit Union Administration (NCUA) proposed changing the definition of a “small credit union” to include those with up to $30 million in assets, up from the $10 million threshold established in 2003.
When making regulatory changes, the NCUA pays particular notice to how a rule change will impact small credit unions, and the new definition will include more credit unions in that group. Credit unions that meet the regulatory definition for "small" have some additional flexibility when it comes to NCUA rules.
NCUA Chairman Debbie Matz has said recently that one-size-fits-all supervision is "no longer appropriate in a credit union industry with nearly 100 million members and more than $1 trillion in assets."
The Credit Union National Association (CUNA) maintains that a credit union with up to $100 million in assets could reasonably be defined as "small" and encouraged the agency to raise the threshold to at least $50 million.
"Specific numbers, like $30 million, often fall out of date quickly," said John Annaloro, CEO of the Northwest Credit Union Association (NWCUA). "Accordingly, it might be advisable to set the definition as a specific portion of the credit union system. When the NCUA definition for 'small credit union' was first established, it represented the rough equivalent of the smallest half of the credit unions. I believe that for enduring public policy purposes the limit could be smartly set at 150-to-175 percent of the median asset size for all credit unions, allowing for automatic self-adjustments in the years ahead."
The regulatory burden is an issue for credit unions of all sizes, but Annaloro explained that the NCUA's definition has implications not only for all credit unions, but for all financial institutions.
"This also recognizes that credit unions are small compared to big banks, and the increasing regulatory hurdles continue to be a business necessity for the entire financial sector," Annaloro said. "It is also important that for 2012, the FDIC set the definition of a ‘small bank’ as an institution that had assets of less than $1.160 billion. Fairness and equality could be considered here.”
NCUA board member Michael Fryzel stressed that the agency's action today was still nothing more than a proposal and said credit unions will have an opportunity to comment and to recommend other thresholds. NWCUA Director of Regulatory Advocacy John Trull said he expects the Association to
“For the past few years, the Association has defined a small credit union eligible for Foundation grants and the Farleigh Wadda Witt retainer program as $35 million and under (in assets)," Trull said. "But at a small-credit union roundtable hosted by the Association last week, credit unions with less than $100 million in assets shared similar concerns to $30 million dollar credit unions. The Association will likely encourage the NCUA to adjust the definition by an amount that more accurately reflects the shared concerns of the entire subset of credit unions."
As part of the same board meeting, the NCUA also discussed a proposed rule that would allow credit unions to invest in Treasury Inflation Protected Securities (TIPS), another topic that was highlighted in the NCUA 2012 "Listening Sessions." TIPS are government-issued securities that are repriced to reflect inflation and eflation, while the adjusted or original principal is paid at maturity.
The board also explored a proposed rule that would expand the definition of “rural district” for field-of-membership (FOM) purposes and an advance notice of proposed rulemaking (ANPR) that would make changes to the payday-alternative loans. A full summary of the meeting is available online courtesy of CUNA.
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