Small Credit Unions and Complexity

The NCUA Board is proposing to raise the asset threshold for a small credit union from less than $10 million in assets to less than $30 million in assets. It is also proposing to exclude small credit unions from NCUA’s definition of a complex credit union.

According to the Board, raising the asset threshold from $10 million to $30 million would mean an additional 1,603 federally-insured credit unions (FICUs) would be defined as a small credit union and bring the total number of FICUs covered by the definition to 4,041 or 58 percent of all FICUs.

In addition, 230 out of the 1,603 FICUs would no longer be defined as complex. This means that these 230 FICUs would no longer be subject NCUA's risk-based net worth requirement.

However, there are 409 banks with less than $30 million in assets and they are subject to risk-based capital requirements.

While small credit unions do not pose an undue risk to the National Credit Union Share Insurance Fund (NCUSIF), I believe most people would agree that complex credit unions are engaged in riskier activities than non-complex credit unions. These complex institutions should be expected to hold more capital to offset the risk they pose to the NCUSIF.