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Sept. 28, 2018

Agency 2019 budget features 60% OTR, for third straight year of decline

Complying with new federal law, NCUA this week unveiled its 2019 and 2020 budgets (with increases of 4.3% and 3.7%, respectively, over the 2018 budget) and announced a public briefing on its budget proposals for Oct. 17 at 10 a.m.

Importantly, the proposal indicates a decline for the third straight year to an estimated 60.4% for the overhead transfer rate (OTR), the rate at which NCUA transfers funds from the National Credit Union Share Insurance Fund (NCUSIF) to the agency’s operating budget to cover “insurance-related expenses.”

Although the agency in 2016 revived its own practice of hosting public budget “briefings,” the enactment in May of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155) engraved into federal law the requirement that the agency hold an annual hearing on its budget proposal and publish it in the Federal Register. The agency is also required to solicit and consider public comments.

Along those lines, NCUA said this week it would take comments on the proposal until Oct. 26.

As for what NCUA proposed: The total budget changes – with the budget rising to about $334.8 million in 2019 and $343.9 million in 2020 – combine figures from three agency budgets: the operating budget, capital budget, and share insurance fund administrative budget. The operating budget makes up most of the agency’s overall spending plan (between 91% and 93%, depending on the year). It is financed by funds transferred from the National Credit Union Share Insurance Fund (NCUSIF) – the OTR – and fees paid by federal credit unions.

For 2019, the OTR proposed by NCUA will be an estimated 60.4%, according to the documents released this week. That’s down from last year – which was the lowest in years following adoption by the agency of a new method for calculating the rate – of 61.5%. In 2017, the OTR was 67.7% and the previous year 73.1%, the all-time high.

FCU operating fees will cover the remaining 39.6% of the operating budget, the agency said. For 2019, NCUA said, the operating fee will increase 2.2% over 2018.

(In a chart illustrating how the operating budget is funded, NCUA indicated that funds resulting from the OTR are split between that emanating from federally insured state-chartered credit unions – 29.4% of the OTR funds – and from federal credit unions – 31%.)

The agency said the proposed overall 2019 budget represents an increase of about $13.9 million from the previous year’s of $320.9 million. The estimated 2019 operating budget would be about $304.4 million, up from the approved figure of $298.1 million for 2018. For 2020, the agency anticipates another increase of $9.1 million overall. The estimated 2020 operating budget is $316.2 million, up about $11.8 million from the 2019 figure.

For 2019, NCUA is estimating a reduction of 10 full-time equivalent (FTE) staff positions from approved 2018 levels; no changes are estimated for 2020 in total FTEs. The budget summary and justification also provide various estimates on how its budgets are changing when indexed to inflation, and in nominal dollars.

NCUA Posts 2019-2020 Proposed Budget, Sets Oct. 17 Public Briefing


A change in the OTR for the third straight year – and well down from the all-time high of just three years ago – demonstrates the importance of the state system speaking up about the issue, according to NASCUS President and CEO Lucy Ito.

“NASCUS has been advocating for a fairer and more transparent OTR for more than 20 years, and this latest estimation by NCUA – a reduction in the rate by nearly 13 percentage points from the high point of 2016 – is evidence of the state system’s effective voice,” Ito said.

She also noted that, over those two decades, NASCUS and state system-sponsored analyses of the law -- including a 2001 legal study and a second legal analysis in 2015 – played key roles in presenting the case. Those studies, she noted, helped the association to effectively advocate that the agency allocate its safety and soundness examination costs for federal credit unions fairly between the insurance fund and federal credit union operating fees, and that the OTR be open to periodic public notice and comment. Both positions were adopted by NCUA in 2017.

In other comments related to the overall NCUA budget, Ito said NASCUS is continuing to analyze the budget proposal and will weigh in as appropriate.

NASCUS OTR resource pages


A number of bills of interest to the state credit union system were approved this week by the House, as it gets ready to wind down its work before the November elections. Among the bills passed were:

  • Empowering Financial Institutions to Fight Human Trafficking Act of 2018 (H.R. 6729), instructing the Treasury secretary to implement a safe harbor for non-profit organizations when sharing specific information with financial institutions that facilitates their duties of customer due diligence and suspicious activity reporting related to human trafficking, (approved on a roll-call vote of 297-124).
  • 7(a) Real Estate Appraisal Harmonization Act (H.R. 6347), and Small Business Access to Capital and Efficiency Act (H.R. 6348), which would conform the Small Business Administration’s appraisal thresholds in its 7(a) and 504 programs with those of federal banking regulators (including NCUA). Both were passed on voice vote.
  • Protect Affordable Mortgages for Veterans Act of 2018 (H.R. 6737), making a technical change to ensure that recently executed mortgage loans refinanced by the Department of Veterans Affairs Home Loans remain eligible for pooling in Ginnie Mae securities (passed on voice vote).


Credit unions across the country, not just individual states, would be subject to provisions of the anti-redlining Community Reinvestment Act (CRA), under a bill introduced this week by Sen. Elizabeth Warren, D-Mass. According to the senator, the goal of the bill–the American Housing and Economic Mobility Act–is to tackle the crisis around affordable housing in the country and to lower the costs of homes in some neighborhoods. The legislation is given little chance of action for now, as Warren’s political party does not control either the Senate or House. Next session might different, if Democrats take control of one or both. NASCUS leader Lucy Ito noted that -- by design of law and regulation—credit unions only serve their member-owners and do not engage in the “redlining” practices that led to the CRA. “As such, subjecting all credit unions to CRA is a burden and cost without added benefit,” she said.


Next week, NCUA Board Chairman J. Mark McWatters is scheduled to join fellow financial institution regulators in testifying before a Senate committee on regulators’ progress in putting to work the regulatory relief law, EGRRCPA (S. 2155). The Tuesday hearing before the Senate Banking Committee (starting at 10 a.m., and live-streamed via the Internet) includes as witnesses McWatters, Comptroller of the Currency Joseph M. Otting, Federal Reserve Vice Chairman for Supervision Randal K. Quarles, and FDIC Chairman Jelena McWilliams.

An informal count of actions taken by NCUA that were spurred by EGRRPCA since the law was enacted May 24 is six – including the scheduling this week of an EGRRCPA-mandated briefing (and publication) of the proposed NCUA annual budget. Other actions include joint letters with other regulators, release of FAQs, etc.).

Additionally, NCUA was among the first (if not the first) federal financial institution regulator to act under the new law. On June 5 the agency published a final rule allowing federally insured credit unions not to count any loans made on 1-to-4-unit family dwellings toward their statutory member business loan cap. EGRRCPA made the change via statute. (The hearing may also provide some insights about how to phonate the new law’s acronym, which one federal regulator has already termed “utterly unprounceable.”)

Senate Banking Committee hearing on Implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S.2155).


Leaders of the state credit union system – in the persons of members of the NASCUS Regulator Board and the Credit Union Advisory Council – gathered on Capitol Hill this week to champion the interests of the state credit union system before members of Congress.

The regulators and credit union representatives, meeting jointly with congressional representatives, presented four asks on behalf of the state system:

  • Increase the NCUA Board from three to five members and ensure state representation to the NCUA Board;
  • Exempt pre-existing nonprofit executive compensation contracts from the excise tax in parity with for-profits;
  • Pass data breach legislation that does not preempt more stringent state laws and that subjects non-financial institutions to the same data security standards as financial institutions; and
  • Provide clarity for serving legal marijuana-related businesses.

“We were on the Hill to educate lawmakers about the importance of the state system and to advocate for Congressional action that would strengthen and support the system,” said NASCUS’ Lucy Ito. “The state system is a vital part of the financial services community, as state-chartered credit unions hold nearly half of the total credit union assets of $1.4 trillion and count almost half of all credit union memberships of 115 million,” she added.

NASCUS is following up with additional information and outreach to the congressional offices.

(In the photos, at top (from left): NASCUS Regulator Board Members Kim Santos and Janet Powell, and Chairman John Kolhoff, meet with John Hair, staff member to Rep. Sean Duffy, R-Wis. and a member of the House Financial Services Committee. At bottom (from left): Credit Union Advisory Council Member Brian Wolfburg, Janet Powell, Evan Williams (of the staff of Rep. Scott Tipton, R-Colo., and also a member of the Financial Services Committee) and Advisory Council Member Mike Williams discuss key issues.)


Sources for data and how the information is used are the subjects for a “request for information” (RFI) issued this week by the BCFP (formerly known as the CFPB); comments will be accepted for 90 days. Accompanying the RFI is a report describing the data collected by the agency, where the data comes from, and how the data is accessed and reused within the BCFP. The report also outlines the full text of the agency’s internal data governance policies and charters, BCFP said in a release.

“To carry out its statutory functions and obligations, the Bureau obtains data to inform its decisions,” the agency said in the release. “To date, the Bureau has undertaken more than 188 data collections from public sources, government agencies, commercial vendors, financial institutions, and consumers.”

BCFP said the RFI is intended to provide a public opportunity to “submit feedback on the Bureau’s data governance program and data use and suggest ways to improve outcomes for both consumers and covered entities.” Comments will be due in 90 days.

Bureau of Consumer Financial Protection Issues Report and RFI on the Bureau’s Sources and Uses of Data

BRIEFLY: Don’t forget: NASCUS 101 set for Nov. 1; Consumer bureau councils meet

Friendly reminder: Learn more about NASCUS and the benefits it offers to credit unions and other state credit union system players in a Nov. 1 “NASCUS 101,” a no-charge event featuring an overview of the benefits of membership in the association. Participants will learn about the NASCUS commitment to the state credit union system, and NASCUS’ unique role … The BCFP’s three advisory councils – the Credit Union Advisory Council (CUAC), Consumer Advisory Board (CAB), and the Community Bank Advisory Council (CBAC) – convened Thursday for the first time after being reconstituted, and in what is reportedly the first joint gathering of all three panels. “This marks the first meeting of the experts from outside government that make up the Bureau’s new-look advisory committees, who are providing a wide array of new perspectives to consumer protection,” said Bureau Acting Director John (Mick) Mulvaney. “We look forward to hearing high-quality feedback from these experts in consumer finance markets to inform the Bureau’s decision-making going forward.”

Info/registration for NASCUS 101; Thursday, Nov. 1, 2-3 p.m. ET

Information Contact:
Patrick Keefe,