Examination Reform Biggest Benefit for “Small” Credit Unions

September 24, 2012 at 7:08 am Leave a comment

As many of you may know by now, on Thursday, the NCUA used its powers under the Regulatory Flexibility Act to increase the threshold below which a credit union is considered a “small credit union” for regulatory purposes from $10 million in assets to $30 million in assets.  Now many of the impacted credit union CEOs are probably still as happy as a tic on a hog.  The proposal is being put on a fast-track with only a 30 day as opposed to 60 day comment period.

For those new “small” credit unions the most immediate impact of this new designation will be mandate relief from the impending interest rate risk and emergency lines of credit policies and less rigorous net worth requirements.

But the most significant impact of this change will be in the examination process for the 1,600 new “small” credit unions.  In July of this year the NCUA announced that well-managed small credit unions would be eligible for a streamlined examination process as the agency looked for ways to maximize the time spent examining larger credit unions, which pose the greatest risk to the share insurance fund.  In the letter, the agency explained that eligible credit unions will be subjected to a “reduced scope aimed at focusing on the most pertinent areas of risk in small credit unions – lending, recordkeeping, internal audit functions.”

To implement this plan, NCUA is raising the profile of the Office of Small Credit Union Initiatives, headed by Bill Myers.  Under the reorganization, this office is  responsible for providing much of the guidance that many smaller credit unions have traditionally received from their examiners – or so NCUA says.

NCUA’s initiative reflects not only a desire to lighten the regulatory burden, but also its increased emphasis on protecting the share insurance fund.  According to NCUA statistics,  222 credit unions with less than $30 million in assets have gone under in the last 14 years resulting in only 18% of the share insurance fund’s losses during that time period.  In contrast, the liquidation of 40 federally insured credit unions with assets greater than $30 million resulted in 82% of the losses to fund.

One note of caution:  the credit union industry has consistently resisted attempts by banking lobbyists and legislators to divide the industry by asset size.  It has consistently argued that irrespective of size, credit unions all have the same charter, same goals and the same commitments to their members.  So we should welcome mandate relief for those credit unions that receive it, but we should also redouble our efforts to find initiatives that will benefit the industry as a whole.






Entry filed under: Compliance, Regulatory. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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