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NCUA Reviews 'Small Entity' Threshold
Monday, February 23, 2015 6:40 AM

The National Credit Union Administration issued a proposal on Thursday that would increase the "small entity" definition to include credit unions with assets of less than $100 million. Credit Union National Association maintains that a much higher threshold of $500 million would be appropriate for purposes of reduced regulatory burden.

The current threshold defines a small credit union as one with assets of less than $50 million, a standard set by the NCUA board in 2013, which had said it would revisit the standard in two years.

The Regulatory Flexibility Act (RFA) generally requires federal agencies to determine and consider the impact of proposed and final rules on institutions defined as "small entities." NCUA Chair Debbie Matz said the proposal will provide regulatory relief for more credit unions in future rulemakings.

"Wherever possible, the NCUA should attempt to relieve the regulatory burden on all credit unions without affecting safety and soundness," Matz said. "That's why we've scaled our rules to target larger credit unions."

According to the NCUA, this change would allow an additional 745 federally insured credit unions to be defined as small entities, bringing the total number of federally insured credit unions covered by the RFA to 4,869.

All three NCUA board members voted their approval of the proposal, but board member J. Mark McWatters said he was in favor of a small entity definition of no lower than $250 million in assets, and said he would support a threshold of $550 million in assets.

"By comparison, the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Federal Reserve Board each use the Small Business Administration's asset threshold of $550 million for determining 'small entity' status under the RFA," McWatters said. "Credit unions with assets of less than $250 million—and, preferably, $550 million—also merit the regulatory relief noted above that follows a 'small entity' designation under the RFA."

Vice Chair Rick Metsger said while he supports the staff recommendation, adjusting the threshold to more than $100 million could make it harder for smaller credit unions to receive assistance from the NCUA's Office of Small Credit Union Initiatives (OSCUI).

"It is very important as we consider rules going forward, and how they impact small credit unions, we don't want to dilute the impact of those rules," he said. "If there is an impact, we don't want it clouded by higher-performing credit unions."

CUNA's advocacy staff is reviewing the proposal and plans to issue a regulatory comment call shortly.