Good news, you’re small!

by: Henry Meier

In Congressional testimony yesterday, NCUA’s Larry Fazio announced that the agency would propose regulations providing regulatory relief to credit unions with less than $100 million in assets. Specifically, NCUA will be changing the definition of what constitutes a small entity credit union from one with $50 million in assets to one with less than $100 million in assets. Federal law gives NCUA the responsibility to consider the impact that proposed regulations have on smaller credit unions and to exempt such institutions from regulatory mandates when appropriate.

In January of 2013, NCUA amended the definition of the small entity from those with less than $10 million to those with less than $50 million in assets. At the time, NCUA estimated that this change meant that 67.8% of federally insured credit unions were designated as “small entities.” If NCUA follows through with its latest proposal, Fazio estimated that 77% of all credit unions would be eligible for enhanced regulatory relief.

Credit unions have already gotten a preview of how important such a shift could be with NCUA’s announcement that it is proposing to increase the threshold for Risk-Based Capital compliance from $50 to $100 million. In addition, credit unions with less than $50 million in assets were exempted from enhanced interest-rate risk policies. Going forward we won’t know for sure precisely what regulatory relief credit unions will entitled to until the regulation is finalized. At the very least, credit unions with less than $100 million in assets will be eligible for increased assistance from NCUA’s Office of Small Credit Union Initiatives and a framework has now been put in place to extend regulatory relief to a large majority of credit unions.

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