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NCUA Board Approves 2018-2019 Budget

Mon, Nov 20, 2017

The National Credit Union Administration Board approved a number of items during its November meeting, including the 2018-2019 budget:

  • Operating, capital, and Share Insurance Fund budgets for 2018 and 2019 to fund the agency’s essential activities and strategic priorities.
  • A new methodology for calculating the overhead transfer rate that simplifies the calculation and reduces administrative resource needs, with a Federal Register notice for posting.
  • A final rule making amendments to agency regulations governing corporate credit unions that revises provisions regarding retained earnings and Tier 1 capital.

The Chief Financial Officer briefed the Board on the performance of the Temporary Corporate Credit Union Stabilization Fund, which closed Oct. 1. The Fund received an unmodified, or “clean” final audit.

 
2018–2019 Budget Plan Approved

Board members approved budgets for 2018 and 2019, subject to adjustment at the annual mid-year review at the Board’s scheduled July 2018 open meeting.

The overall 2018 budget will be $321 million, an increase of 0.9 percent from 2017. The 2019 budget will be $331.4 million, a 3.2 percent increase.

The agency’s budget has three components: the operating budget, the capital budget, and the Share Insurance Fund budget. The 2018 operating budget will be $298​.1 million, a 2.1 percent increase from 2017. The 2019 operating budget will be $302.7 million, a 1.5 percent increase from 2018.

The 2018 operating budget includes a net decrease of 42 full-time-equivalent positions from 2017. The 2019 operating budget includes a net decrease of 14 full-time-equivalent positions. All staff reductions will come from attrition.

The Board adopted the budget plan after taking public comments, including presentations made at the Oct. 18 public briefing.

Here's the 2018–2019 budget plan:

Budget component20182019
Operating budget    $298.1 million $302.7 million
Capital budget $15.4 million $21.2 million
Share Insurance Fund budget $7.4 million $7.5 million
Full-time equivalents 1,188 1,174
 

Capital budget increases are largely driven by necessary data infrastructure improvements.

In the last year, the NCUA has taken significant steps to increase efficiency and control costs. The agency in July announced its restructuring plan that includes closing 40 percent of its regional offices, eliminating overlapping office functions, and re-tooling its business model.

Detailed information about NCUA’s operating budgets for 2018 and 2019, along with information about previous budgets, is available on the agency’s Budget and Supplementary Materials webpage.

 
New Methodology Yields 2018 Overhead Transfer Rate of 61.5 Percent

The NCUA Board approved a new methodology for calculating the overhead transfer rate that is principles-based, simpler, more equitable and transparent, and will result in lower administrative costs.

Based on the new, Board-approved methodology, the 2018 overhead transfer rate is 61.5 percent, compared to 67.7 percent in 2017.

The new methodology rests on four principles:

  • Time spent examining and supervising federal credit unions is allocated as 50 percent insurance-related;
  • All time and costs spent supervising or evaluating risks posed by federally insured, state-chartered credit unions or other entities the NCUA does not charter or regulate is allocated as 100 percent insurance-related;
  • Time and costs related to the NCUA’s administration of federal share insurance and the Share Insurance Fund are allocated as 100 percent insurance-related; and
  • Time and costs related to the NCUA’s role as charterer and enforcer of consumer protection and other non-insurance-based laws are allocated as 0 percent.

The overhead transfer rate is one of two sources of funding for the agency’s budget, the operating fee being the other. It is a transfer of funds from the Share Insurance Fund to cover insurance-related expenses paid by both federally chartered credit unions and federally insured, state-chartered credit unions.

A summary of the new methodology is available online here, and the approved Federal Register notice is available online here.

 
Operating Fee Scale Increases 15.7 Percent for Federal Credit Unions

The Chief Financial Officer reported that 2018 operating fee will increase 15.7 percent for natural-person federal credit unions, and the corporate federal credit union operating fee scale will remain unchanged.

The NCUA uses the operating fee to pay the agency’s costs of regulating federal credit unions. Credit unions with assets of less than $1 million will not be assessed the fee. The NCUA will charge the fee in March 2018, and payments will be due April 17, 2018.

Overall, federal credit unions will fund 69.9 percent of the NCUA’s 2018 operating budget, while state-chartered credit unions will fund 30.1 percent.

Detailed information on the operating fee is available online here.

 
Final Rule Makes Changes in Corporate Credit Union Regulation

The Board approved a final rule (Part 704) to amend agency regulations covering corporate credit unions with respect to retained earnings and Tier 1 capital.

The changes are appropriate for the current corporate credit union system, which has stabilized and consolidated in the wake of the financial crisis.

The final rule will better align capital components with a corporate credit union’s financial statements and will clarify the minimum retained earnings requirement for corporate credit unions. The final rule will not alter existing standards for prompt corrective action, and the agency does not propose to change regulations on authorized investments, concentration risk limits, maturity limits or other limitations on corporate investment activities.

The final rule, available online here, will become effective 30 days after publication in the Federal Register.

 
Stabilization Fund Closes With a $2.6 Billion Net Position

For the quarter ending Sept, 30, 2017, the Temporary Corporate Credit Union Stabilization Fund's net income was $570.6 million, increasing the Fund’s net position to $2.6 billion.

NCUA's Chief Financial Officer briefed the Board on the Fund’s final quarterly performance, based on audited information. The increase in net income was due primarily to interest revenue received by the Fund as a result of a partial recovery of the $1 billion capital note from the asset management estate of the U.S. Central Federal Credit Union. Contributing to net income during the quarter was a $43.6 million reduction in the provision for insurance losses and $5.6 million in guarantee fee income for the third quarter.

The NCUA Board on Sept. 28 voted to close the Stabilization Fund effective Oct. 1. As required by statute, the Stabilization Fund’s remaining funds, property, and other assets were distributed to the National Credit Union Share Insurance Fund, which assumed the activities and obligations of the Stabilization Fund, including the NCUA Guaranteed Notes Program. The Share Insurance Fund will report on these activities in the future.

The final Stabilization Fund audit has been completed, and that audit resulted in an unmodified, or “clean” opinion. The audit reports for the Stabilization Fund closing package and financial statement are available online here.

Created by Congress in 2009, the Stabilization Fund reduced the impact on credit unions of the costs of resolving the corporate credit union crisis.