ALEXANDRIA, Va. — If the NCUA Board's proposed $30 million limitto define small credit unions stands, 1,603 credit unions would beexcluded from risk-based net worth requirements and a provision ofthe interest rate risk rule, according to the NCUA's action memo onthe topic.

The increase was among three proposed rules and one request for information approved by theboard at its meeting Thursday in Alexandria, Va.

The rule would greatly impact the NCUA's Office of Small CreditUnion Initiatives, increasing the number of credit unions it servesby 66%.

OSCUI Director Bill Myers told the board he is reorganizing theoffice to allocate resources more efficiently to meet the increaseddemand. For example, small credit unions will be provided increasedaccess to assistance online and will receive phone calls before theagency sends someone to assist the institution in person.

Board Chairman Debbie Matz said the proposed rule is “a stepforward” for small credit unions struggling to survive.

“I talk about how credit unions have come through the recoveryso well, but it's a very different story for small credit unions,”she said.

When comparing industry assets to 1998, when a small creditunion had fewer than $1 million in assets, a comparable range todaywould be between $30 million and $45 million, according to theboard action memo.

The NCUA also said it would re-evaluate the rule that requirescredit unions with more than $50 million in assets to adopt andimplement an interest rate risk policy.

Another proposed rule would permit credit unions to invest inTreasury Inflation Protected Securities, which increase or decreasein value according to inflation. The idea came from credit unionsthat suggested the investment to Matz during her Listening Sessionsacross the country earlier this year, she said.

Frank Kressman, associate general counsel, told the board thatTIPS pose no risk to principal, saying the value would never fallbelow the original investment. He said TIPS aren't a “cure-all” tointerest rate risk management, but it is one additional tool creditunions can use to manage that risk.

In response to Matz's question about any potential risks TIPSpose for credit unions, Rick Mayfield, the NCUA's senior capitalmarkets specialist, said credit unions need to understand how thesecurity differs from others, especially when setting interest raterisk modeling assumptions.

The board also proposed increasing the definition of a ruraldistrict, expanding it beyond the current 200,000 person thresholdto include the ability to exceed that number, provided the areacontains less than 3% of the total state's population. Thatproposed rule will have a 60-day comment period.

Finally, the board requested comment from credit unionsregarding changes it could make to encourage greater participationin offering payday alternative loans, or PALS as the agency is nowcalling them.

In particular, the board is requesting suggestions regardingchanges that could be made to the allowed application fee andinterest rate, so that the product is more attractive to creditunions without adversely impacting members, Matz said.