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March 17, 2017

NCUA working on OTR, report states

Improvements to the overhead transfer rate (OTR) and the federal credit union operating fee are being determined by NCUA based on remarks received in last spring’s comment period on the two key funding mechanisms for its budget, NCUA reports in its 2016 Annual Report, released by the agency this week. The report notes that, in considering the comments, the agency is determining what improvements can be made and applied “in a fair and equitable manner to all federally insured credit unions.”

NASCUS President and CEO Lucy Ito said the association welcomed the agency’s efforts, and called on it to move forward. “By next month, the agency will have had one year to consider the 2016 comment period responses – which overwhelmingly shared the view that changes must be made to the OTR methodology,” she said. “The credit union system has made its view clear; the agency should be clear about when it will take action.”

State supervisory agencies are also addressed in the report, with regard to new technology systems and the agency’s “Exam Flexibility Initiative (EFI).” Regarding use of new information technology systems, the report notes that NCUA will analyze systems used by state regulators, “and other financial regulators,” to determine “if an off-the-shelf commercial application can meet our needs, and begin laying the groundwork for procuring new applications and systems.” The agency also states that it will continue applying its EFI and will be “making additional improvements in the way NCUA coordinates examinations with state supervisory authorities, among other areas.”

NCUA 2016 Annual Report


Additionally, the NCUA 2016 report lists a series of “challenges ahead” for the agency and credit unions, including:

  • Cybersecurity threats: “With credit unions and other small financial institutions increasingly targeted, NCUA must continue to strengthen the resiliency of individual credit unions, the entire system and the agency.”
  • Whether to charge a share insurance fund premium: “In making such decisions, NCUA will remain mindful of how a premium would affect the bottom line of credit unions, while assessing the desirability of maintaining the fund at its full normal operating level during times of strong credit union system performance.”
  • Helping small credit unions: “NCUA will continue to provide assistance and seek additional ways to support the many small, low-income and minority depository institutions that provide access to affordable financial services for the middle class and people of modest means.
  • Closing the Temporary Corporate Credit Union Stabilization Fund (TCCUSF): “The Stabilization Fund is set to expire in 2021. Prior to that time, NCUA will adopt plans for the fund’s smooth closure, as well as reach a decision on the disposition of the securities that back the NCUA Guaranteed Notes.”


Also this week, NCUA released state-by-state figures from year-end call reports for federally insured credit unions (FICUs), showing mixed results in membership growth for 2016. Overall membership among FICUs advanced by 4.2 million members for the year (totaling 106.9 million in the fourth quarter of 2016). However, 51% of FICUs had fewer members at the year-end 2016 than a year earlier. Further, as in recent years, smaller credit unions are typically not sharing in the growth; according to the NCUA numbers, 75% of credit unions with declining memberships had less than $50 million in assets. “In 23 states, the median membership growth rate for federally insured credit unions was negative,” NCUA reported. “At the median, membership declined the most in the District of Columbia (-1.9%), followed by Pennsylvania (-1.5%).” The agency also reported that Alaska had the highest median membership growth rate (2.4%), followed by Maine (2.0 %). There is at least one hopeful sign: In 2015, the median membership growth rate was -0.2% – but in 2016, that rate inched up to -0.1%.

NCUA Quarterly U.S. Map Review (see page 6 for memberships)


A plan to reorganize the federal government, including NCUA and other independent agencies, is due to be presented to President Donald Trump in about one year, under an order signed by the president early this week. It calls for the director of the federal Office of Management and Budget (OMB) to pull together the plan and present to the president after receiving input from the agencies (and the public) over the next six months. OMB will have six months to write up the plan after the comment period. In developing the plan, the order calls for OMB to make recommendations to eliminating unnecessary agencies, components of agencies, and agency programs, and to merge functions through legislation or executive action. OMB is specifically directed to consider if functions of federal agencies would be better left to state or local governments, “or to the private sector through free enterprise.” The order also calls for the OMB to identify redundancies across the federal government and whether the costs of continuing to operate an agency or its programs are justified by the public benefits provided.

Presidential Executive Order on a Comprehensive Plan for Reorganizing the Executive Branch


Comments on a delayed effective date (to April 1, 2018) for a CFPB rule on prepaid accounts will be due April 5; the comment period is three weeks (21 days). The bureau is proposing the delayed effective date because, it states, “some industry participants believe they will have difficulty complying with certain provisions of the Prepaid Accounts Final Rule.” The bureau states that it wants to assess whether any additional adjustments to the rule are appropriate. The six-month extension, according to CFPB, would help assist industry participants in addressing certain “packaging-related” logistics for prepaids sold at retail locations.

Notice of request for public comment/extension of prepaid rule effective date


The CFPB’s Credit Union Advisory Council has set March 30 (at 3:15 p.m.) as the date for its next meeting. The group, which is established to advise the bureau in its exercise of functions under the federal consumer financial laws as they pertain to credit unions with total assets of $10 billion or less, will discuss alternative data and consumer access to financial records. Anyone who wants to attend the CUAC meeting must RSVP to by noon, March 29; include “CUAC” in the subject line of the RSVP.


State credit union supervisors from across the nation converge on the Washington area next week for two days of discussions with federal officials about current trends, issues and events. Among others, the regulators will hear from NCUA, CFPB, Treasury, and the Federal Emergency Management Administration (FEMA). Among the issues to be discussed at the NASCUS-sponsored event are interstate branching, adding the “S” component to CAMEL, marijuana business banking, cybersecurity, CUSOs, emergency management and other current topics. The Monday-Tuesday session is being held at National Harbor, just south of Washington.


Another step in granting federal banking charters to financial technology companies (fintech) was taken this week with the release of a draft licensing manual supplement by the Office of the Comptroller of the Currency (OCC). The proposed supplement to the agency’s existing Licensing Manual explains how the agency will apply licensing standards and requirements in existing regulations and policies to fintech companies applying for special-purpose national bank charters. The move is not without some complications: in a letter late last week, Chairman Jeb Hensarling (R-Texas) and other House Financial Services Committee members asked Comptroller Thomas Curry not to rush on a fintech charter –  and let the next comptroller weigh in (Curry’s term expires next month) -- or the committee could exercise its oversight power to overturn any changes.

OCC release on draft licensing manual supplement issued

Information Contact:
Patrick Keefe, NASCUS Communications, or (703) 528-5974