ALEXANDRIA, Va. (3/20/15)--A reissued proposed rule from the National Credit Union Administration would see the removal of the 5% cap on fixed assets. The agency unveiled the rule at its board meeting Thursday, and all three board members voted in favor of the proposal.
|NCUA board members listen to agency staff on the proposal to eliminate the 5% cap on fixed assets during the March open board meeting Thursday. (CUNA Photo)|
The proposal would eliminate the aggregate limit on fixed assets, currently set at 5% of assets; eliminate all provisions relating to waivers from the 5% limit; and establish a six-year time period for partial occupancy for federal credit union premises.
The NCUA issued a proposed rule on fixed assets in July 2014, but after considering the 36 comments to the proposal, it was altered significantly enough to warrant the proposal be reissued.
Larry Fazio, director of the NCUA's Office of Examination and Insurance, said the management of fixed assets will address risks associated with fixed-asset ownership through the supervisory process.
"Our primary risk management focus going forward on this subject will be on ensuring credit unions can afford the level of fixed assets they require," he said.
Fazio added that the fixed assets will be reviewed by examiners in the following situations:
"If current earnings are not impaired, examiners would look merely to ensure the credit unions have carefully evaluated the risk that high investments in fixed assets represents on its ability to create flexibility to handle unexpected future pressures on income," Fazio said.
Unlike last year's proposal, this one does not require credit unions to have a fixed-assets management plan if those assets are more than 5% of total assets. However, Fazio noted that credit unions with a high level of fixed assets without any kind of documented analysis would likely be interpreted by examiners as an unsafe practice.
NCUA Chair Debbie Matz said the proposal would affect approximately 3,700 federal credit unions and estimated it would eliminate 2,500 hours of paperwork.
"I feel quite strongly that credit unions should be able to manage all of their fixed-asset purchases without regulatory micromanagement," she said. "Decisions to upgrade facilities, update technology, or purchase other fixed assets are business decisions that should be made by credit unions and not NCUA."
The proposal has a 30-day comment period, which will begin when it is published in the Federal Register.