ALEXANDRIA, Va.–At its meeting here, the NCUA Board approved a two-year budget, decreased the Overhead Transfer Rate for next year, was told a premium is likely going to be necessary to shore up the NCUSIF's equity ratio, and got an update on the health of the NCUSIF itself.
Here's a look at each:
Combination of Factors Could Lead to NCUSIF Premium
ALEXANDRIA, Va.–NCUA staff are reporting that a combination of factors have come together so that “we’re at a point now where the equity ratio has started to drop" in the National Credit Unoin Share Insurance Fund (NCUSIF). The NCUSIF’s equity ratio is currently 1.27%. The FCU Act sets a floor of 1.20% before credit unions must pay a premium based on their deposits to boost that ratio. But the NCUA board previously set a desired ratio level of 1.30%, which the current board has the option to change. The NCUSIF currently insures just below $1 trillion in credit union members’ shares. Should the current board vote in favor of a premium to increase the ratio it might not need to come in 2017. The full story can be found here.
And The New Overhead Transfer Rate Is...
ALEXANDRIA, Va.–NCUA has announced a decrease in the overhead transfer rate (OTR). For 2017, the OTR will be 67.7%, down from the current 73.1%. The National Association of State Credit Union Supervisors (NASCUS) issued a statement saying it believes that number can be lowered further. The OTR represents funds “transferred” from the National Credit Union Share Insurance Fund to cover what NCUA says are its costs related to supervising state-chartered credit unions. The OTR and operating fees provide for NCUA’s budget.
During the NCUA board meeting, agency staff said the 540 basis point reduction in the OTR is the result of the reduction in exam time at state-chartered CUs and the reassignment of 20,000 man-hours to compliance activities. In addition, there has been a stronger alliance with various state agencies that has resulted in fewer hours by NCUA personnel on-site at state charters, the agency said. For the full story, go here.
NCUA Board OK's Two-Year Budget; How Politics Have Helped to Play a Role
ALEXANDRIA, Va.–The NCUA board has approved a 2017 operating budget of $298.2 million and a 2018 budget of $312.1 million. The final 2017 budget, which is down 1.7% from the previously approved budget, was OK’d by the board less than a month after it hosted a budget briefing with credit unions to share their feedback and suggestions.
Board member Mark McWatters, noting he has been an opponent of setting two-year budgets, said he was moved to vote in favor in part because of political changes. The board currently has a vacancy. McWatters, who is nominated for a board seat on the Export Import Bank, noted in the future it could even lack a quorum, so setting a board-approved two-year budget was a prudent move.
A key issue raised by credit unions at that hearing and by their trade groups in general has been why NCUA’s budget is not shrinking as the number of insured CUs continues to get smaller, and as the agency is preparing to roll out a regulatory flexibility initiative that will lead to fewer exams, especially on-site.
The 2017 budget calls for 17 fewer full-time equivalents and the 2018 budget assumes 25 fewer examiners across its five regions. Overall, NCUA plans 1,230 FTEs in 2017 and 1,208 FTEs the year after. Jones said Compensation and travel represent 83% of the budget. For the full story, go here.
How the NCUSIF is Performing
ALEXANDRIA, Va.–The National Credit Union Share Insurance Fund (NCUSIF) reported $12.1 million in net income during the third quarter, bringing the fund’s net income since Jan. 1 to $14.3 million.
The fund showed $57.1 million in total income and $45 million in total expenses during the quarter. Operating expenses during the quarter were $2.2 million more than had been estimated. The update was provided by the agency’s CFO, Rendell Jones, during the November meeting of the NCUA board.
Jones also shared additoinal information on the performance of CAMEL, 3,4 and 5 credit unions.
For the full story, go here.
Trade Groups Press NCUA to Cut Budget
ALEXANDRIA, Va.—Immediately after the NCUA board voted in favor of operating budgets for 2017 and 2018, both credit union trade groups issued statements calling for the agency to cut spending. That story can be found here.