NASCUS PRESIDENT AND CEO LUCY ITO ON ADOPTION OF 62.3% OTR (AN INCREASE OF 100 BP)

‘The state system believes that the increase is indicative of the need for the agency to reconsider how it allocates expenses to the OTR’

Dec. 18, 2020

CONTACT: Lucy Ito, NASCUS president and CEO, [email protected]; (703) 528-8351

While we support, and are grateful for, the changes that have been made since 2017 to the methods for determining the overhead transfer rate, the state system believes that the increase for 2021 by one point from 2020 (to 62.3%) is indicative of the need for the agency to reconsider how it allocates expenses to the OTR.

For example, what appears counterintuitive to us in the 2021 budget is that the projected increase in workload for state exams is not matched with an at least equal if not greater increase in workload for federal credit union exams given that assets between state and federal CUs are approximately equal, yet FCUs outnumber FISCUs by more than 1,000 (3,213 FCUs versus 1,920 FISCUs as of the end of the 2020 third quarter).

Further, the 1-point OTR increase will essentially mean there will be $3.3 million less to cover losses by the National Credit Union Share Insurance Fund should those materialize as the result of an economic downturn due to the financial impact of the coronavirus pandemic.

NASCUS will continue to work with NCUA to allocate expenses in a way that safeguards balance and equity, and that ensures that the insurance fund has the resources necessary to protect the savings of credit union members.

Along those lines, NASCUS welcomes the formation of an OTR working group comprised of NCUA, state regulators, and NASCUS to assure transparency in and reasonableness of cost allocation assumptions to foster equity between federal and state credit unions.

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NASCUS is the national association that advocates for a strong and healthy state credit union system, and whose members include state regulatory agencies, credit unions, credit union leagues, and organizations that support the state credit union system.