WASHINGTON - A top government official is readying a plan to offer comprehensive regulatory relief to as many as half of all federal credit unions.

Dennis Dollar, a National Credit Union Administration board member, said his "Reg-Flex" proposal would reward safe-and-sound credit unions with fewer exams, more investment options, and freedom from a rule that indirectly restricts branching.

Mr. Dollar called his plan the flip side of congressionally imposed "prompt corrective action" rules that are expected to be approved at the agency's Feb. 3 board meeting. Under these rules, credit unions with low capital-to-asset ratios would be subject to penalties and tighter supervision.

"I think Reg-Flex will enable credit unions to be more competitive and to adjust better to the changing marketplace," Mr. Dollar said in an interview Monday.

To qualify for regulatory relief, a credit union would have to have above-average capital and a strong safety-and-soundness rating - for example, a capital-to asset ratio of at least 10% and an overall Camels rating of 2 for two or more years. Mr. Dollar, the lone Republican on the three-member NCUA board, predicted that 30% to 50% of the nation's 6,700 federal credit unions would qualify.

Qualified institutions would obtain relief from a variety of rules. For example, they might move from a 12-month examination cycle to a 15-month or 18-month cycle. Safe-and-sound credit unions would also gain investment freedom. Finally, they could be freed from a regulation - intended to restrict growth - that limits fixed assets such as branch offices and computer technology to 5% of total assets.

"Where should we be spending the bulk of our [regulatory] resources?" Mr. Dollar asked. "I believe it should be in those institutions with capital and management issues, not in those institutions that have proven their ability to manage risk."

Initial feedback on the concept has been positive. "I do support and have advocated strongly regulatory flexibility for credit unions," said NCUA Chairman Norman E. D'Amours, who cautioned that he had not yet seen Mr. Dollar's plan.

"We are very supportive and feel this is one of the most important initiatives coming out of NCUA in some time," said Mary Mitchell Dunn, associate general counsel at the Credit Union National Association.

Mr. Dollar plans to air the plan Feb. 28 in a speech at CUNA's government affairs conference. He will formally propose it to the NCUA board on March 16.

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