The NCUA Board has a unique opportunity to promulgate a regulation that will have a positive impact on small credit unions. At a future board meeting they will vote on changing the current definition of small entity credit union from less than $50 million in assets to less than $100 million in assets. It is a good move but one that could be better.
The current definition of a small credit union was adopted by the board in 2013 and was the second time it has been changed since initially defined in 1987. The continued changes in the financial services industry and credit unions specifically dictate a more frequent review of the threshold and a more robust approach to setting a standard.
It is significant to note that there is no continuity amongst federal agencies in the definition of a small entity. But that should not surprise anyone. It is rare within the federal government to find agreement on anything.
The Small Business Administration says that a business is small if its assets are under $550 million, whereas the CFPB uses the figure of $175 million or less to consider an entity as small. The differences in those numbers reflect quite a range and quite a disparity.
Credit unions are unique. They are not for profit cooperatives owned by their members and provide financial services at better rates and lower costs than their competition. They are however, financial institutions operating in a competitive environment. And for those that maintain strong principles of safety and soundness, although being small in a world of giants, deserve greater consideration for regulatory relief.
There appears to be no real consensus on what the best number NCUA should deem appropriate for the small entity designation. It's now $50 million; proposed is $100 million with some recommending as high as $550 million. Others have suggested adopting either the SBA or CFPB benchmarks.
Perhaps a better approach would be to consider the fact that NCUA is back changing the definition after only two years. It is commendable that they did not wait longer, but rather saw the need to take action sooner than later. They should maintain this forward perspective and rather than just take a baby step proceed with a giant leap and set the asset designation at a more reasonable level.
Defining a small credit union as one with assets of less than $250 million is not only a reasonable move but also one that will accommodate those needing relief from certain regulations the most. In addition, maintaining a two year review of this change will provide sufficient time to study the new levels impact and provide the board with ample information for future consideration.
Get this one done.
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