Credit unions push NCUA for exam parity with small banks
Credit union trade groups are calling on the National Credit Union Administration to “level the playing field” for examination cycles, arguing that community banks have an unfair advantage over credit unions.
The Credit Union National Association says the NCUA has not moved quickly enough to grant an 18-month exam cycle to credit unions assets of $3 billion or less after the threshold for community banks was raised from $1 billion to $3 billion under the Economic Growth, Regulatory Relief and Consumer Protection Act, also known as S 2155, earlier this year.
"Credit unions are concerned that NCUA has not taken steps to address the increased commercial appraisal thresholds the banking agencies adopted back in April,” CUNA President and CEO Jim Nussle said in a letter to the NCUA. “These competitive advantages given to banks translate into tangible costs for credit unions.”
The debate ultimately comes down to size. Fewer than 100 credit unions have $1 billion or more in assets, said Monique Michel, CUNA’s senior director of advocacy and counsel. That translates to roughly 5% of all credit unions, compared with 600 banks holding $1 billion or more in assets.
Banks “dwarf” credit unions in terms of the number of institutions that have $1 billion to $3 billion in assets, Michel said.
Community bankers don’t see differences in examination parity as a problem, saying that the industries aren’t comparable.
“Comparing the banking industry to the credit union industry is comparing apples to oranges,” said Chris Cole, vice president and senior regulatory counsel at the Independent Community Bankers of America. “If [Nussle] really wanted to level the playing field, he should call for the taxation of his members.”
What banks called for and received in the regulatory relief package “only applies to banks deemed well-capitalized, and it comes to expansion of about 400 banks that fall between [$1 billion to $3 billion in assets] that would qualify for" lengthier cycles, Cole added.
After S 2155 was signed into law, Rep. Claudia Tenney, R-N.Y., introduced the Small Bank Exam Cycle Improvement Act, or HR 5076, which spurred credit union trade groups to push the NCUA to expand the 18-month exam cycle for low-risk credit unions.
The National Association of Federally-Insured Credit Unions is also on board.
"We have long advocated for the NCUA to use its authority to return all healthy and well-run credit unions to an extended exam cycle, regardless of size," NAFCU President and CEO Dan Berger said.
The push for exam changes comes at a time when the NCUA is already in the midst of major changes, having recently completed a pilot program examining the viability of remote exams. Only credit unions in the NCUA’s Region IV were tested, but the agency is plotting an eventual nationwide expansion.
While banks have looked to Congress to help improve the exam process, CUNA insists any work that must be done can be accomplished by the NCUA without legislation.
"I think as we see Congress moving toward additional regulatory reform with regard to financial institutions, there's always a possibility" Congress will move forward with legislation, "though I suspect such a vehicle may be geared more toward capital formation initiatives,” Michel said.
“The current NCUA board is reasonable and they care about the credit union system," Michel added, so "I'm not convinced a legislative solution would be necessary here."
The NCUA declined to comment.