NCUA approves 2018-19 budget, revised OTR methodology

November 16, 2017

The NCUA board approved the agency’s 2018-2019 budget, overhead transfer rate (OTR) methodology and a final corporate credit union rule at its meeting Thursday. The meeting also featured the final quarterly update on the Temporary Corporate Credit Union Stabilization Fund, which was closed Oct. 1.

The overall 2018 budget will be $321 million, an increase of 0.9% from 2017. The 2019 budget will be $331.4 million, a 3.2% increase.

The 2018 operating budget includes a net decrease of 42 full-time-equivalent positions from 2017. The 2019 operating budget includes a net decrease of 14 full-time-equivalent positions.

CUNA testified at last month’s budget briefing, and followed up with a letter, praising NCUA for some reductions and offering additional suggestions.

The newly approved OTR methodology is designed to be principles-based, simpler, mort equitable and transparent, as well as result in lower administrative costs. The new methodology sets the 2018 OTR at 61.5%, down from 67.7% in 2017.

The new methodology is based on four principles:

  • Time spent examining and supervising federal credit unions is allocated as 50% insurance-related;
  • All time and costs spent supervising or evaluating risks posed by federally insured, state-chartered credit unions or other entities the NCUA does not charter or regulate is allocated as 100% insurance-related;
  • Time and costs related to the NCUA’s administration of federal share insurance and the share insurance fund are allocated as 100% insurance-related; and
  • Time and costs related to the NCUA’s role as charterer and enforcer of consumer protection and other non-insurance-based laws are allocated as 0%.

Chief Financial Officer Rendell Jones also reported that that 2018 operating fee will increase 15.7% for natural-person federal credit unions, and the corporate federal credit union operating fee scale will remain unchanged.

The final corporate credit union rule is meant to better align capital components with a corporate credit union’s financial statements and will clarify the minimum retained earnings requirement for corporate credit unions.

It will become effective 30 days after published in the Federal Register.

Finally, Jones gave a report on the stabilization fund, noting it closed with a $2.6 billion net position. After the fund closed, its remaining funds, property and other assets were transferred to the share insurance fund, which assumed the activities and obligations of the stabilization fund, including the NCUA Guaranteed Notes program.