Written by Steve Van Beek
Yesterday, the federal financial agencies - including NCUA and the CFPB - jointly issued a Supervisory Statement on the subject of supervisory and enforcement authority over insured banks and credit unions. As most are aware, the CFPB has primary examination authority over credit unions above $10 billion in assets while the NCUA retains primary authority over credit unions below this threshold.
This Supervisory Statement details how the agencies will calculate the $10 billion dollar threshold as well as transition periods when an institution is either growing above $10 billion in assets or declining below $10 billion in assets. The discussion also gets into merger situations where both institutions were less than $10 billion before the merger.
The agencies realized that frequent regulator changes for institutions hovering around the $10 billion asse threshold would not be productive. Here is from the statement:
"Consistent with these objectives, including regulatory burden reduction, the Agencies also believe that frequent periodic assessments for determining asset size are not optimal going forward. For purposes of assessing whether an Institution is large or not, point-intime measures that are made on a frequent basis would lead to uncertainty about the ‐ 2 ‐identity of the principal supervisor with respect to Federal consumer financial law in the case of Institutions with assets close to the $10 billion threshold, since such Institutions’ asset sizes will likely change over time. Moreover, frequent periodic assessments could result in a sudden shift in an Institution’s principal supervisor with respect to Federal consumer financial law, thereby imposing potential increased regulatory burden on the Institution and potentially interfering with the orderly implementation of the Agencies’ responsibilities with respect to Federal consumer financial law."
The agencies decided to follow a FDIC practice and use four quarters of call reports to make the asset threshold. Thus, a credit union going over the $10 billion asset threshold in the future would not fall under the CFPB's authority until four consecutive quarters above $10 billion:
"The June 30, 2011 Call Report data represent uniformly reported data for Institutions on the reporting date closest to the date that authority for the Federal consumer protection laws was transferred to the CFPB. Consequently, the Agencies will look to June 30, 2011, Call Report data to determine an Institution’s asset size for purposes of sections 1025 and 1026 of Dodd-Frank initially. Thereafter, an Institution will not become a Large Institution for purposes of sections 1025 and 1026 unless it has reported total assets of greater than $10 billion in its quarterly Call Report for four consecutive quarters – and, similarly, an Institution will not cease to be a Large Institution for such purposes unless it has reported total assets of $10 billion or less in its quarterly Call Report for four consecutive quarters."
The Statement then gives very good examples of transition situations.
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Keep in mind that the $10 billion threshold is not indexed for inflation - meaning that more and more credit unions could be nearing the $10 billion threshold in the next few years and definitely within the next decade.
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Have a great weekend everyone! I'll be busy looking through wedding and honeymoon photos - picking a few good ones out for future blog posts. I have a feeling I might be able to also squeeze in the Michigan - Nebraska game as well. Go Blue!
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