ALEXANDRIA, Va. – Credit unions will see some real regulatory relief after last week's NCUA action to increase the asset-size threshold that defines a "small" credit union. The threshold was raised from $10 million to $50 million as CUNA had recommended.
There are at least three areas where this new threshold will make a real difference for covered credit unions struggling with regulatory burdens, according to CUNA. The threshold increase means that two-thirds of all credit unions are exempt from NCUA’s rules governing interest rate risk (IRR) and prompt corrective action (PCA) risk-based net worth requirements.
Also, for all future rulemakings, the NCUA must now consider credit unions with less than $50 million in assets in determining burdens and possible exemptions.
The NCUA's IRR rule requires credit unions to develop and maintain a written IRR policy and an IRR management program. In some cases, the agency has also tied NCUSIF coverage to IRR compliance.
Under PCA rules, as an institution’s capital level deteriorates, its CAMEL rating goes up. When that happens, regulators are required to increase supervision and take actions meant to force management to make improvements.
CUNA said NCUA's pending emergency liquidity rule is one rule that the agency may need to reconsider. That rule, as currently proposed, would require federally insured credit unions (FICUs) with less than $10 million in assets to maintain basic written emergency liquidity policies, and require FICUs with assets of $10 million or more to develop contingency funding plans and have access to a backup federal liquidity source for emergency situations.
The threshold increase will also make assistance from the NCUA's Office of Small Credit Union Initiatives (OSCUI) available to more than 4,600 credit unions, an increase of 2,270. Eligibility for OSCUI grants, however, will be limited to designated low-income credit unions, not all "small" credit unions.
CUNA has also noted that the threshold increase does not impact the agency's determination of which credit unions get streamlined examinations. While that issue is under separate consideration, the $10 million threshold will continue to apply, at least for this year.