Removing Barriers Blog

NCUA Removes 5% Limit on Fixed Assets
Posted October 02, 2015 by CUNA Advocacy

In a Letter to Credit Unions released today (10/2/2015), NCUA declared that federal credit unions will no longer have to comply with a 5 percent limit on fixed assets, effective October 2.

This revised rule removes the 5 percent limit on fixed assets and removes the need for federal credit unions to apply for waivers if they plan to exceed the former limit. Decisions to upgrade facilities, update technology, and purchase other fixed assets can now be made by each federal credit union’s management team, under policies set by the board of directors.

NCUA examiners will no longer focus on fixed assets, unless any of the following conditions occur in a federally insured credit union: 

• The credit union has an unresolved Document of Resolution item, enforcement action, or outstanding waiver concerning fixed assets;
• The credit union has weak earnings or other structural earnings weaknesses (such as high operating expenses);
• Fixed assets exceed 5 percent of assets; or
• The credit union has made a major acquisition of premises since the last exam or approved a plan to make a major acquisition of premises.

In these exceptional cases, NCUA examiners will focus on whether the credit union can afford the level of fixed assets in which it has invested.

Existing and pending waivers of the five percent aggregate limit on fixed assets are rendered moot effective October 2, 2015, the effective date of the revised rule. Waivers associated with other parts of the rule, such as the occupancy requirements, remain in effect.
The attached Supervisory Letter provides updated guidance to NCUA examiners on evaluating credit union investments in fixed assets.  The guidance establishes a consistent framework for the examination and supervision process NCUA uses to review the risks associated with fixed assets. In addition, the guidance provides information that will help credit unions prudently manage potential risks associated with fixed assets. We are glad NCUA issued this guidance to clarify the extent of this new, more flexible rule.

Federal credit unions may contact their NCUA regional office with any questions about this regulatory relief initiative.  State-chartered credit unions should consult with their state supervisory authority concerning any state limitations on fixed assets.