Monday, March 7, 2011

Should the Small Credit Union Threshold Be Raised?

Addressing the Credit Union National Association's Government Affairs Conference, NCUA Board Member Gigi Hyland last week stated that she believed the asset size threshold for a small credit union should be raised, as a way of reducing credit union regulatory burden.

Board Member Hyland stated: "I believe NCUA should seriously consider revising the definition of “small entity” to a larger number, perhaps from $10 million to $50 million.... I'll be pursuing these revisions with NCUA staff and my Board colleagues."

NCUA policy requires the agency to "prepare and make available for public comment an initial regulatory flexibility analysis for any regulation that will have a significant economic impact on a substantial number of small entities."

In 2003, NCUA raised the small entity asset size threshold from $1 million in assets to its current threshold of $10 million. This $10 million asset size threshold meant that approximately 52 percent of federally-insured credit unions were treated as a small entity -- a percentage much closer to the percentage captured by the asset standard when its policy was originally adopted, which defined a small entity as having $1 million or less in assets.

So, how would raising the threshold to $50 million impact the credit union industry?

According to September 2010 financial data, if you raise the threshold from $10 million to $50 million, the number of federally-insured credit unions that would be treated as a small credit union would increase from 2831 or 38.26 percent of the industry to 5,244 or almost 71 percent of federally-insured credit unions.

Therefore, an increase of the asset size threshold to $50 million would result in a larger percent of credit unions being defined as a small credit union compared to when the NCUA Board raised the threshold in 2003.

However, raising the asset size threshold from $10 million to $50 million would greatly outpace the increase in the consumer price index, which increased by slightly more than 21 percent between the January 2003 and January 2011. If you only adjust for inflation, the new small credit union asset size threshold would be $12.1 million.

Read the speech.


  1. If one considers that the median cu is around $15 Million and the Average size is something approaching $200 Million, then $50 Million is an appropriate number for "small cu's".

  2. Since banks and credit unions are financial institutions and the threshold for regulatory impact is based upon an independent determination of "small entity," the size of the institution should be the same. Thus since the FDIC uses $175 million, the NCUA should use $175 million.



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