The National Credit Union Administration voted to raise the asset threshold for credit unions falling under its Office of National Examinations and Supervision, a move that could ultimately mean closer scrutiny for all large credit unions.
At its
Currently 11 credit unions hold more than $15 billion of assets, but eight more credit unions are poised to cross the $10 billion-asset threshold by January, the regulator said.
With the rule change, credit unions with assets between $10 billion and $15 billion will be supervised by their appropriate regional office effective Jan. 1. All credit unions above $10 billion of assets currently supervised by ONES will continue to be supervised by that office under the final rule.
Credit unions that cross the $15 billion threshold will be supervised by ONES going forward.
With the rule change, the NCUA projects that only one credit union will transition to ONES in the next two years.
But that does not mean that credit unions under the $15 billion asset level are getting off the hook, said Mark Treichel, a former NCUA executive director who now runs Credit Union Exam Solutions.
While a credit union transferring to ONES faces longer examinations with many more hours of NCUA time allotted, Treichel expects “bracket creep” to impact those institutions remaining under regional supervision.
“The regions can be expected to now spend more time in the credit unions between $10 billion and $15 billion,” he said. “It seems clear that more is going to be expected of credit unions that are less material to the [share insurance fund] than when ‘too big to fail’ regulations were launched.”
Treichel said he also anticipates requirements for
“The reality is that when NCUA adds a regulatory requirement to one size credit union and NCUA learns more about those disciplines, it tends to trickle down to smaller credit unions who may be asked to improve their processes via industry standard or safety and soundness,” he said.
An NCUA spokesperson said among the other supervisory practices appropriate for the largest institutions, credit unions under ONES supervision experience a deeper evaluation of risk management governance and capital resiliency, in-depth cyber and information technology risk reviews and a combination of onsite and offsite supervision throughout the year.
NCUA board chairman Todd Harper said the rule change has other benefits, such as creating new developmental opportunities for examiners, providing a smoother transition for consumer credit unions that will eventually fall under ONES’ supervision and enhancing knowledge-sharing and expertise between ONES and regional staff.
“That collaboration extends to training regional staff on their new supervisory responsibilities related to capital planning and stress testing,” Harper said.
The change will also save the regulator some cash.
Without the threshold change, the ONES team had projected the need for up to 14 new staff members because of the number of credit unions crossing the $10 billion threshold.
Pat Keefe, former vice president of communications for the National Association of State Credit Union Supervisors and editor of the
But Kyle Hauptman, vice chairman of the NCUA board, said the change is just a stopgap. As credit unions grow in assets, more supervision will eventually move to ONES, he said.
“Today, we are at an appropriate point to thoughtfully evaluate our supervision strategy,” he said. “I’d like to ask my fellow board members to commit resources for a review of asset thresholds in the next year. Not just adjusting the thresholds themselves, but other tools as well.”
NCUA board member Rodney Hood said with the
“I learned from one credit union that these requirements will cost them nearly $1 million a year,” he said. “I would have preferred that this rule provide further relief to our capital planning regime as the state of the share of the insurance fund has changed significantly since the financial crisis.”
