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NCUA Board Meeting Recap

Mon, Nov 21, 2016

District Of Columbia

The NCUA Board met Thursday to approve the 2017 – 2018 budget. There were also several other key developments on the Exam Flexibility Initiative, OTR rate, and Share Insurance premium. Here’s a rundown of what was approved, what was discussed and what to expect in 2017: 

  • There will be a $1 million decrease in the NCUA’s overall budget. The approved operating budget is $298.2 million for 2017 and $312.1 million for 2018. The NCUA Board will continue holding mid-year budget reviews, with the next one scheduled for July 2017.
  • The NCUA will institute an 18-month exam cycle for credit unions below $1 billion in assets that carry a CAMEL 1 or 2 rating. The other exam changes proposed in September will also be accepted (virtual exams, etc.), further refinements are expected next year.
  • The Overhead Transfer Rate will be set at 67.7 from the 2016 rate of 73.1. NCUA staff plan to deliver a report with recommended changes to the OTR by January 31, 2017.
  • NCUA staff projects a Share Insurance premium range of 3 – 6 basis points for 2017. The assessment will not occur now, but is expected sometime after Q1 in 2017.

With respect to the premium assessment, in additional discussion with staff since the Board meeting, this assessment will NOT occur now.  Under the next Chair (presumably Mark McWatters post-Jan. 20) they will take a very slow, cautious approach to any potential assessment, and a final decision is unlikely until after April or maybe a later.  There are three principal external factors that will play a role in the decision: 

  • Most notably, higher interest rates that would make it easier for the Fund to earn money and thus lessen the need for an assessment. 
  • Deposit growth, which is on a trend to continue, but the pace and amount cannot be predicted. 
  • Anticipated losses.  Board staff is hopeful that these losses may not materialize, so the current $1.27 may get closer to the desired $1.30 due to cash flow improvements by the time a decision has to be made next year.

Board sources continue to advise us that credit unions should keep making a case that the Board should simply leave the rate at $1.27 - there is no legal requirement to have the Fund at $1.30.  It's simply a policy decision, and NCUA doesn't have to choose to assess a premium at these current levels.

 

You can read NCUA Chair Metsger’s full statement on the 2017-2018 budget here