Final Rule Summary
Prepared by the NASCUS State Regulatory Affairs Department
January 11, 2013
National Credit Union
Administration
12 CFR Part 702.103; 741.3; 791.8
Revision of Definition of
Small Credit Union
_____________________________________________________________
The National Credit Union Administration (NCUA) has issued a final rule revising the definition
of a small credit union. These changes are amendments to Interpretive Ruling and Policy
Statement (IRPS) 87-2, as well as 12 CFR Parts 702, 741, and 791.
The Rule takes effect 30 days after publication in the Federal Register.
Rule at-a-Glance:

Updates NCUA's definition of the term "small entity" for purposes of the Regulatory
Flexibility Act from credit unions with less than $10 million in assets to credit unions
with assets of less than $50 million.

Credit unions with assets of less than $50 million will be excepted from risk-based net
worth requirements.

Credit unions with assets of less than $50 million will be excepted from interest rate risk
policy and program requirements.

NCUA will review this new threshold within two years, and then every three years as part
of the rolling review of all NCUA regulations.
The final rule may be read here.
Background
In 1981, the NCUA defined a small credit union for the purposes of the Regulatory Flexibility
Act as any credit union with less than $1 million in assets. The NCUA Board, believing the
1981 definition outdated, updated the threshold to credit unions with less than $10 million in
assets in 2003. This new rule further expands that definition, including organizations with assets
below $50 million in accordance with NCUA's stated policy of considering a credit union's size
and imposing only the minimum required regulatory burden.1
1
IRPS 87-2 (as amended by IRPS 03-2).
The Regulatory Flexibility Act attempts to encourage federal agencies to give special attention to
the inability of smaller entities to handle the compliance costs of new regulations. The NCUA
final rule allows the NCUA to consider the cost to credit unions with less than $50 million in
asset of paying for outside assistance to address compliance with new regulation. This rule
change will maintain close to the same percentage of system assets and system net worth in the
small category as when the size standard was amended to $10 million in 1998.
Summary of Part 702 Revised Definition of Small Credit Union
The NCUA rule changes the definition of a "complex" credit union from those with more than
$10 million in assets to those with more than $50 million.2 Complex credit unions are
automatically subject to mandatory PCA requirements if their risk-based net worth (RBNW)
requirement is not met.3 Non-complex institutions are not subject to a RBNW requirement, and
therefore are not at risk to automatically trigger PCA in those circumstances. This change eases
the regulatory burden on small credit unions by limiting the circumstances in which an institution
with less than $50 million in assets can trigger PCA.
Summary of Part 741.3 Revised Definition of Small Credit Union
The new rule also revises the requirement for a written Interest Rate Risk (IRR) policy in
determining the insurability of a credit union. Previously, a credit union with assets between $10
and $50 million was required to adopt and implement an IRR program if the total of first
mortgage loans it held, combined with total investments with maturities greater than five years,
was less than 100% of its net worth.4 Credit unions with less than $10 million in assets were not
required to comply with the IRR requirement.5 Under the new rule, a credit union with less than
$50 million in assets will be categorically excluded from this requirement, regardless of its
investment portfolio.
Summary of IRPS Revisions
The NCUA rule updates IRPS 87-2 by changing the definition of a small credit union from those
with less than $10 million in assets to those with under $50 million in assets. This policy
requires the NCUA to give robust consideration to whether these institutions should be exempt
from certain future regulations on the basis of their size and the anticipated burden of complying
with a given rule. NCUA will review this new threshold within two years, and then every three
years as part of the rolling review of all NCUA regulations.
2
12 CFR 702.103. A credit union must also have a RBNW requirement exceeding 6% in order classify as complex.
As such, this change will only immediately effect credit unions with assets between $10 and $50 million with a
RBNW calculation of more than 6%. However, this change alleviates the regulatory burden for all credit unions in
this size range by eliminating the need to monitor their RBNW calculation.
3
12 CFR 702.202(a).
4
12 CFR 741.3(b)(5).
5
Id.