New NCUA Rule Heightens Regulator’s Focus on Largest Credit Unions | Credit Union Journal
The National Credit Union Administration has voted to raise the asset threshold for credit unions under its National Examination and Oversight Office, a move that could ultimately mean greater scrutiny of all major credit unions. .
At his Thursday meeting, the NCUA Board of Directors raised the minimum asset threshold for credit unions under ONES from $10 billion to $15 billion. ONES began operations in 2013 and oversees the largest and most complex credit unions in the United States.
Currently, 11 credit unions hold more than $15 billion in assets, but eight more credit unions are on track 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 beginning January 1. final rule.
Credit unions that cross the $15 billion threshold will be supervised by ONES going forward.
With the rule change, the NCUA expects only one credit union to transition to ONES in the next two years.
But that doesn’t mean credit unions below the $15 billion asset level are okay, said Mark Treichel, a former NCUA executive director who now leads Credit Union Exam Solutions.
As a credit union transferred to ONES faces longer reviews with significantly more hours of time allocated to NCUA, Treichel expects “bracket creep” to impact institutions remaining under regional supervision.
“Regions can be expected to now spend more time in credit unions between $10 billion and $15 billion,” he said. “It seems clear that more will be expected from credit unions that are less important to the [share insurance fund] than when the “too big to fail” regulations were launched.
Treichel said he also foresees requirements for capital planning and stress tests will begin to affect credit unions under $10 billion.
“The reality is that when the NCUA adds a regulatory requirement to a one-size-fits-all credit union and the NCUA learns more about these disciplines, it tends to trickle down to smaller credit unions who may be asked to improve their process via industry standards or safety and soundness,” he said.
A spokesperson for the NCUA said that among other oversight practices appropriate for larger institutions, credit unions under ONES supervision experience more in-depth management governance assessment. risk and capital resilience, in-depth cybersecurity 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 development opportunities for reviewers, a smoother transition for credit unions to consumption that will eventually fall under the supervision of ONES and improving the sharing of knowledge and expertise between ONES and regional staff. .
“This collaboration extends to training regional staff on their new oversight responsibilities related to capital planning and stress testing,” said Harper.
The change will also save the regulator money.
Without the threshold change, the ONES team had anticipated the need for up to 14 new staff due to 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 Regulatory reportsaid that credit union business groups seem support the rule — with some suggestions — and the paucity of comment on the rule is likely due to the fact that the NCUA does not impose any new requirements on credit unions.
But Kyle Hauptman, vice chairman of the NCUA board, said the change was only a stopgap. As credit unions increase their assets, more oversight will eventually shift to ONES, he said.
“Today we are at an appropriate point to thoughtfully assess our oversight strategy,” he said. “I would like to ask my fellow board members to commit resources to a review of the asset thresholds over the next year. Not just by adjusting the thresholds themselves, but also other tools.
NCUA board member Rodney Hood said with the continuous consolidation in the industry, and with credit unions becoming increasingly complex, the new rule does not go far enough. It should provide additional regulatory relief to credit unions in terms of capital planning, according to Hood.
“I learned from a credit union that these requirements would cost them almost $1 million a year,” he said. “I would have preferred this rule to provide more relief to our capital planning regime, as the state of the insurance fund share has changed significantly since the financial crisis.”