NASCUS supports raising threshold for ‘complex’ CUs to $500 million

(March 26, 2021) The state system supports raising the asset threshold to $500 million for defining a credit union as “complex” under risk-based net worth (RBNW) requirements, citing the benefit the move would accrue for both credit unions and their members.

In a comment letter filed this week with NCUA, NASCUS wrote that it concurred with NCUA over raising the threshold from $50 million to $500 million, stating that the action would not result in a material increase in risk the National Credit Union Share Insurance Fund (NCUSIF). Beyond that, NASCUS wrote, the benefit of the regulatory relief provided by the threshold change for both credit unions and their members “outweighs any nominal increase in risk.”

NCUA provides a compelling case in the Supplemental Material for raising the asset threshold,” NASCUS wrote. “We note the fact that the proposed change would provide relief to 1,737 federally insured credit unions (FICUs) while maintaining coverage of over 81% of assets held by FICUs.”

In January, the NCUA Board proposed (on a vote of 2-1, with now-Chairman Todd Harper dissenting) to propose the rule raising the asset threshold. The board noted then the difficulties posed by the ongoing COVID-19 pandemic, and said the proposal is aimed at providing a measure of regulatory relief to further encourage credit unions to ensure access to credit and other services.

NASCUS acknowledged in its comment letter that while an overwhelming majority of credit union assets would still be covered under the RBNW provisions, more modestly sized credit unions would be able to refocus on responding to the financial impact of the pandemic and serving their membership.

Additionally, NASCUS wrote, it makes sense to cohere the current threshold now to the threshold taking effect Jan. 1 under the 2015 Risk-Based Capital Rule (2015 RBC Final Rule).

The question before us is what regulatory and supervisory sense is there for maintaining a $50 million threshold for the remaining nine months of 2021 given the limited risk mitigation utility maintaining a low threshold provides? We see little benefit to maintaining the existing threshold as an interim benchmark,” NASCUS stated.

NASCUS Summary: Proposed rule, Risk Based Net Worth – COVID 19 Relief; Complex credit union threshold (Part 702) (members only)