NCUA raises small credit union threshold to $100 million

Sep 18, 2015

Yesterday, the NCUA unanimously voted to raise the small credit union threshold from $50 million to $100 million in total assets. This change, a part of the Regulatory Flexibility Act (RFA), allowed the NCUA to determine and consider the impact of proposed and final rules on small credit unions, and with it, more CUs will be considered for regulatory relief in future rulings. This marks the first change since the threshold moved from $10 million to $50 million in 2012.

SmallCUthresholdrisesRegulatory relief has made headlines in various forms in recent months, and is one of the key reasons for doubling the small credit unions ceiling. NCUA Chairman Debbie Matz said, “The intent is to extend the threshold to include more credit unions, and ensure it keeps pace with changes in the industry.”

The NCUA summary document of the decision regards that credit unions with less than $100 million “generally face more significant challenges than their larger peers based on their relatively small asset base, membership, and economies of scale.” It goes on to highlight the data that led to the definition change, including a reflection of the competitive disadvantages across multiple industry metrics for federally-insured credit unions below the $100 million threshold.

Regarding this decision as a form of regulatory relief, Matz added that, “For each rule, the board has authority to exempt or ease compliance for credit unions of any asset size we determine to be prudent. So while the $100 million threshold provides regulatory relief consideration for 76 percent of all credit unions, we will continue to seek other opportunities to provide regulatory relief for even more credit unions.”

While the vote was unanimous, Board Member J. Mark McWatters told Credit Union Times that he didn’t think the $100 million mark went far enough. “Since credit unions compete against banks, the credit union cap of only $100 million potentially exposes credit unions to a greater regulatory burden than that of comparably positioned banks.” The article noted that the FDIC, OCC and Federal Reserve all use the Small Business Administration’s asset threshold to determine small entity status, which is $550 million under the RFA.

The move to define more credit unions as small could certainly change the way individual institutions handle their risk management practices, including the ALLL.

This cap-change affects a significant portion of institutions, as the number of small credit unions increases by more than 700, and will now stand at nearly 4,700.