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Washington
Proposed rule eliminates 5% fixed-asset cap
ALEXANDRIA, Va. (8/1/14)--Credit unions would be able to manage their fixed assets without waivers or permissions from the National Credit Union Administration under a proposed rule issued by the agency board Thursday.

The rule, which applies to credit unions with more than $1 million in assets, would allow credit unions to exceed the 5% limit without prior NCUA approval, provided it is done by establishing and following a fixed-asset management policy. It would also simplify the partial occupancy requirement for premises acquired for future expansion.

Board member Rick Metsger said that the NCUA's review of fixed assets demonstrated that many factors, including net worth, delinquency ratios and CAMELS rating were not significantly different for credit unions with fixed assets above 5% against those that are below 5%.

"[Our analysis] also demonstrated that investments in fixed assets were not a major contributor to losses for the Nation Credit Union Share Insurance Fund," he said. "Quite the contrary, investment in fixed assets correlates to positive asset growth, share growth and membership growth."

In March 2013, the NCUA issued proposed amendments to the rule to further clarify the rule, but without any changes to the regulatory requirements. During that proposal's comment period the Credit Union National Association was among those suggesting elimination of the fixed-asset cap.

CUNA advocated for the removal of the cap, and suggested the agency replace it with requirements that credit unions have written policies that set parameters for ownership of fixed assets. CUNA also noted that the policies and their implementation should be subject to examiners review. Each of those items are contained in the NCUA's proposed rule.

Metsger said that reforming the fixed-asset cap has been a priority since he took office in 2013, and NCUA Chair Debbie Matz credited him for initiating the effort to change the rule. Metsger called the proposal a "positive regulatory relief measure" that would help both credit unions and agency staff.

Matz said the proposal will move the agency away from micromanaging credit unions' business decisions that have no impact on safety and soundness.

"Rather than spending hours writing a waiver application, credit unions could better devote their time to developing a fixed-assets management program under this proposed rule," she said.

The proposal would apply to more than 3,500 credit unions, Matz said.

The comment period for the proposed rule is open for 60 days after it is published in the Federal Register .

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