Proposed NCUA budget aligns w/ strategic initiatives

November 20, 2019

CUNA Chief Economist Mike Schenk thanked NCUA for its transparency on budget priorities and noted the agency’s budget justification is clear, comprehensive and well-developed at NCUA 2020-21 budget briefing Wednesday. NCUA published its proposed budget last month, and will accept comments through Dec. 2.

The board is expected to vote on the budget at its Dec. 12 meeting.

“The proposed activities and expenditures described align with previously-announced and vetted strategic initiatives including the Examination Flexibility Initiative, remote examinations & data analytics, as well as modernization of the agency’s Information Technology systems and cybersecurity concerns,” Schenk said. “The NCUA’s proposed 2020-21 budget reflects a 3.9% increase, or 2.3% after accounting for a mandatory retirement system contribution, which seems reasonable in the context of approximately 2% inflation and with the 6% increase in credit union operating expenses which is the point of reference for most credit union CEOs.”

Schenk thanked NCUA for its responsiveness to CUNA concerns in recent years, including adjusting the overheard transfer rate methodology, addressing fast-rising costs and implementing an extended examination cycle or streamlined examination for certain credit unions.

Schenk also addressed several items CUNA has heard about from its member credit unions, including:

  • Encouraging NCUA to focus on smooth transitions with as little disruption as possible when it comes to consolidating regions;
  • Urging NCUA to extend the credit union asset threshold to $3 billion (up from the current $1 billion) for credit unions to be eligible for 18-month examination cycles;
  • Looking forward to any addition distributions from the National Credit Union Share Insurance Fund, depending on NCUA’s analysis, and to a phase-down of the Normal Operating Level to 1.3% by 2021;

Schenk also addressed NCUA board member Todd Harper’s proposed expansion of NCUA’s Office of Consumer Financial Protection with the goal of creating a dedicated consumer compliance examination program for “large, complex credit unions.” CUNA believes this is not warranted.

“There has been no supplementary evidence introduced or observed to suggest credit unions’ consumer compliance management has become a risk area warranting an increased expenditure of agency resources,” he said. “Absent evidence demonstrating an emerging need or establishing a clear benefit to all credit unions, our members view the proposal as a solution in search of a problem.”

CUNA recommends the NCUA build upon the consumer compliance resources currently available to credit unions through the agency, and further improve examiner training to ensure examinations are more efficient and less invasive rather than developing and implementing a new, costly examination procedure.