NCUA approved a proposed rule that would raise the asset ceiling for its definition of a "small entity" credit union by $50 million to $100 million.
Although raising the asset ceiling does not by itself provide any immediate regulatory relief, it would increase the number of credit unions eligible for exemption from future regulations. More than 4,100 credit unions currently qualify as small entities under the current $50 million asset ceiling. Doubling it, as the agency proposes to do, would add an additional 745 institutions.
Thursday's vote was unanimous — but not without controversy.
During the agency's February board meeting on Thursday, Board Member J. Mark McWatters criticized the suggested $50 million increase as inadequate. It fails to provide "meaningful relief" for credit unions struggling to cope with a "relentless barrage of rules and regulations visited on their organizations by NCUA and other regulators," he said.
According to McWatters, the small-entity asset ceiling should be at least $250 million, but he argued it should really be set at $550 million, which is the threshold used by the three federal banking regulators.
The last time NCUA adjusted the threshold was in 2013, when it bumped the level from $10 million up to the current $50 million.
NCUA officials considered a $250 million asset ceiling, but they opted for a lower figure after concluding credit unions with less than $100 million have significantly slower rates of deposit, membership and loan growth than their larger counterparts, according to John Worth, NCUA's chief economist.
Board Member Rick Metsger said he supported the $100 million asset ceiling since a higher figure would "disadvantage smaller credit unions."
"As soon as you have a larger pool, you dilute the impact of smaller credit unions," Metsger said.
McWatters, however, said that concern "misses a key point," namely that even large credit unions are frequently dwarfed by competitors outside the credit union industry. "We need to look at the financial services industry as a whole... NCUA should structure its relief accordingly."
For her part, NCUA Chairman Debbie Matz supported the $100 million threshold. The proposal is now out for a 60-day comment period.
"Small credit unions are essential to the credit union industry and to the communities they reside in, but in fact many are struggling," she said, noting that regulation undoubtedly contributes to the challenges they face, but that they also suffer from outdated technology and tough competition.
NCUA is required to set an asset ceiling defining "small entity" credit unions by the Regulatory Flexibility Act of 1980, which requires federal agencies to consider the impact of proposed regulations on small businesses and consider less costly alternatives whenever possible.
In other news, the board also received a report on the status of the agency's share insurance fund Thursday. Buoyed by recoveries from assets of failed credit unions, which totaled $45.1 million, the share insurance fund reported a profit of $75.9 million in 2014.
According to the report, the number of problem credit unions declined as well. Institutions receiving a CAMELS rating of 4 or 5 totaled 276 at the end of 2014, down from 307 a year earlier. Troubled credit unions reported $10.2 million of insured shares, just over 1% of the industry total.