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NCUA raises definition of "small entity"

The NCUA board, at its first open meeting of 2013, approved a final rule (Parts 702, 741 and 791) to amend the definition of “small entity” from the current threshold of less than $10 million in assets to less than $50 million in assets. This covers more than 4,600 credit unions which will help ease the regulatory burden on them.  

“Small credit unions are essential to their communities and fill a niche other financial institutions can’t,” NCUA Board Chairman Debbie Matz said. “Consistent with our Regulatory Modernization Initiative, this final rule nearly doubles the number of small credit unions receiving regulatory relief. This final rule is also an excellent example of how NCUA listens carefully during the rulemaking process. Last fall, we proposed a new asset threshold of less than $30 million. After reviewing the comments received, we conducted further analysis and determined that we could raise the threshold to cover credit unions with less than $50 million in assets without significantly affecting industry safety and soundness.” 

The Regulatory Flexibility Act generally requires federal agencies to determine and consider the effect of proposed and final rules on small entities. Under the revised definition for a “small entity,” 2,270 more federally insured credit unions will now receive special consideration for regulatory relief. The updated threshold almost doubles the number of federally insured credit unions with regulatory exemptions through the small credit union definition. In all, the final rule covers 4,672 or 67.8 percent of federally insured credit unions. The final rule provides regulatory relief in several ways. First, the rule excludes more credit unions from the risk-based net worth requirements under NCUA’s Prompt Corrective Action rule. Second, all credit unions with less than $50 million in assets will now be exempt from the requirement to adopt and implement interest rate risk policies.

Finally, the NCUA Board will need to use the new threshold when issuing proposed and final rules in the future, such as the pending rule on emergency liquidity, to determine whether to exempt small credit unions from a rule’s requirements or to modify the rule to address the needs of small credit unions. The final rule is the first time in 10 years NCUA has revised the small credit union definition. Under the final rule, NCUA will review the threshold again in two years and then every three years as part of the rolling review process of all NCUA regulations. 

The final rule will be effective 30 days after publication in the Federal Register. To read more about the NCUA board meeting, visit the NCUA's website.