'Inequitable impact' on state CUs, regulators
focus of NASCUS letter to Hill panel
JULY 22, 2015 -- Concern that NCUA’s funding mechanism and examination cycles are having an inequitable impact on state-chartered credit unions and state regulators is the key topic of a letter from NASCUS to the leaders of the subcommittee holding a hearing with agency Board Chairman Debbie Matz on Thursday.
In the letter to Reps. Randy Neugebauer (R-Texas) and William Lacy Clay (D-Mo.) – the respective chairman and ranking member of the House financial institutions subcommittee – NASCUS President and CEO Lucy Ito urged the panel leaders to “carefully examine the proper separation within the NCUA of insurance and supervisory functions, and the impact of that imprecise distinction on the health and well-being of the dual chartering system.”
Ito noted that a primary and long-standing priority of NASCUS is to achieve “meaningful transparency around the NCUA’s budget and its allocation of expenses across state and federal credit unions.” In particular, she pointed to the “overhead transfer rate” (OTR) as an example.
“Generally speaking, increases in the portion of the budget funded by the OTR have led to decreases in direct assessments on federal credit unions,” Ito wrote. “For example, by increasing the OTR in 2014, NCUA was able to shift a substantial portion of its expenses to the insurance fund, thereby enabling NCUA to reduce 2014 federal credit union operating fees by $10.5 million despite an increase of $26.5 million in its 2014 operating budget. This represents a significant reallocation of direct assessment expenses for federal credit unions into indirect insurance fund contributions which are borne by both state and federal credit unions.”
The NASCUS leader also urged the subcommittee leaders to push NCUA to raise the threshold for its annual insurance exam of state-chartered credit unions. “NCUA currently examines all federally-insured credit unions with assets in excess of $250 million on a 12 month cycle, regardless of their CAMEL rating, risk profile, or frequency of examination by the state,” Ito stated. “In some cases, this inflexible policy can lead to state-chartered credit unions with over $250 million in assets being subject to two separate on-site exams in a 12 month period.”
Ito recommended raising the threshold for annual insurance exams to institutions with assets of $500 million or more, and relying on state regulator exams for institutions below that threshold on a risk-based basis.