Should we care about small credit unions
by: Henry Meier
Yesterday, the Senate Banking Committee held a hearing ostensibly dedicated to examining the burdens faced by small financial institutions, including credit unions, and what can be done to help them. I say ostensibly because any discussion of helping small credit unions inevitably and understandably morphs in to a discussion of the role of regulations in general and the need for mandate relief for all credit unions. For instance, I know Risk-Based Capital Reform is a major issue, but it simply isn’t that important to a $20 million, single SEG credit union. Still, it featured prominently in yesterday’s testimony.
The reality is that while proclaiming support for small credit unions, the small family farm and the independently owned bookstore around the corner has an emotional appeal, the real question isn’t so much what we can do to save small financial institutions but why we should bother making the effort in the first place. Once we answer that question, then there are actually practical steps we can take to protect viable small credit unions from extinction.
First, let’s define our terms. Up until about a year ago, a credit union was classified as complex by NCUA if it had $10 million or more in assets. To it’s credit, NCUA has now raised its threshold to $50 million with the result that a majority of credit unions are now considered small, at least by one regulatory measure. NCUA’s action shows how difficult it is to define a small credit union. Nevertheless, we all know what it is when we see one. To their protectors, small credit unions are the institutions that remain truest to the credit union ideals. By not growing, they literally do know most of their members and this personal relationship infuses them with a cooperative spirit that you won’t find, the argument goes, as institutions get larger.
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