CT commissioner outlines 3 areas of OTR concern

April 25, 2016 -- Providing greater transparency, engaging key stakeholders and ensuring equitable treatment of state and federally chartered credit unions are three reasons that NCUA should reconsider the methodology for the overhead transfer rate (OTR), the Connecticut Department of Banking has written in its official comment letter.

In the letter, Connecticut Banking Commissioner Jorge L. Perez focused on three areas where the federal agency should focus its reevaluation. “First, it appears that the OTR methodology has effectively lowered the operating fees for federally-chartered credit unions while increasing the OTR for state-chartered credit unions,” Perez wrote. “As a state banking commissioner, I strongly support the dual chartering system and believe that a strong, vibrant and diverse dual chartering system benefits both credit unions and consumers.”

He noted that while charter is a credit union's choice, “I want to ensure that the state charter provides opportunity for innovation of products and services - a critical element for all financial institutions in today's robust and highly changing and advancing technological environment. An OTR methodology that results in higher fees to a state-chartered credit union than a federally chartered credit union negatively impacts the viability of the state charter,” he wrote.

Secondly, he wrote that, traditionally, evaluating the safety and soundness of a financial institution is the principal goal of the chartering authority (such as the Office of the Comptroller of the Currency) and not the insurer. The Connecticut regulator pointed out that state regulators provide NCUA -- as the insurer -- with a detailed assessment of the financial and operational condition of state-chartered credit unions through sharing of Reports of Examination and coordinated examinations.

“I encourage the NCUA to not only rely upon state Reports of Examination to the fullest extent feasible, but also to account for the efficiencies the state examination process affords the NCUA when reconsidering the OTR methodology,” he wrote.

In closing, Perez urged the NCUA Board to reconsider the agency’s position that the OTR is not subject to the federal Administrative Procedure Act. “Subjecting the OTR to public notice and comment will ensure all stakeholders, including federal and state credit unions, regulators and the public, are afforded the opportunity to periodically review the methodology for fairness, attain a greater understanding of the methodology, and ensure changes made to the methodology address risk to the NCUSIF.”

OTR comment letter from CT DOB Commissioner Jorge L. Perez