Comment Letters Suggest a $50 Million Threshold for Small Credit Unions
Comment letters regarding the NCUA’s proposed rule to increase the maximum threshold for a small credit union to $30 million in assets, from the current limit of $10 million, reveal that many think $50 million is a more reasonable figure.
The comment period, which the NCUA extended from Oct. 25, closed Monday.
NAFCU Regulatory Affairs Counsel Tessema Tefferi is among that group, saying at the very least, the NCUA should increase the threshold to $50 million because it would be close to that established by the CFPB for exemption from mortgage reporting requirements.
However, Tefferi said NAFCU would prefer the NCUA use the CFPB and SBA’s small entity threshold of $175 million in assets, which would facilitate even more government agency consistency.
CUNA Deputy General Counsel Mary Dunn agreed, saying her trade association would also prefer a threshold of $175 million for regulatory relief which would match the SBA, or even an increase to $500 million as the SBA has proposed.
However, Dunn said regulatory relief thresholds should be separated from those used for agency assistance; CUNA recommends what it said is a more reasonable threshold increase for assistance to $50 million in assets. Gregg Stockdale, president of the $35 million 1st Valley Credit Union of San Bernardino, Calif., also said while $30 million is a step in the right direction, $50 million would be more appropriate.
“Every CEO of a smaller credit union that I know is looking to become at least $50 million in assets in order to have some amount of scale,” said the leader of the 3,600-member institution.
The proposed limit of $30 million would affect more than 1,600 credit unions, granting them eligibility for regulatory relief and assistance from the NCUA’s Office of Small Credit Union Initiatives.
OSCUI Director Bill Myers told the NCUA Board in September when the rule was introduced that the proposal would swell the number of credit unions served by the office by 66%. Myers said he would reorganize the office to improve efficiency to meet that increased demand.
Even though Stockdale said small credit unions require relief from excessive regulation and oversight to survive, he added they should not be exempt from risk-based net worth requirements.
“That would open the door to too much speculative risk-taking and future losses,” he said.
Henry Wirz, president/CEO of the $1.9 billion SAFE Credit Union in the Sacramento, Calif., area, warned in his comment letter against “any policy which creates a two-tier regulatory system.”
While the Regulatory Flexibility Act allows the NCUA to consider the impact new regulations have upon small institutions, Wirz said all federally insured credit unions should be held to the same safety and soundness standards.
The failure table presented by the NCUA with the proposed rule, which shows a greater amount of risk in large institutions, is very misleading, Wirz said.
“Large numbers of failed credit unions are merged and therefore are never acknowledged in the statistics,” he said in the comment letter.
If the NCUA widened its failure definition to include credit unions that merge with CAMEL ratings of 3, 4 or 5, the number of credit unions with fewer than $100 million in assets would increase dramatically, and “point to the danger of lessening standards for smaller credit unions,” Wirz said.