NCUA makes the case for bifurcating credit union industry

by: Keith Leggett

In its proposed risk-based capital rule, the National Credit Union Administration (NCUA) makes the case for two credit union industries — one comprised of large, complex credit unions and the other made up of smaller, more traditional credit unions.

Analysis by NCUA found that the line of demarcaation is at $100 million in assets. All credit unions with over $100 million in assets are defined as “complex” and would be subject to the proposed risk-based capital requirement.

The NCUA Board believes there are a number of products and services offered by credit unions with $100 million or more in assets “that are inherently complex based on the nature of their risk and the expertise and operational demands necessary to manage and administer such activities effectively.”

These products and services include member business loans, participation loans, interest-only loans, indirect loans, real estate loans, non-federally guaranteed student loans, non-agency mortgage-backed securities, derivatives, internet banking, and more.

continue reading »