Mon, Nov 25, 2013
Washington, District Of Columbia
On Thursday, November 21, the NCUA Board of Directors met for their regularly scheduled, monthly board meeting. The Board released a final rule with regards to CUSOs; was briefed on the status of the Corporate Stabilization Fund; was briefed on the estimated range of premiums for the NCUSIF and the assessment for the Corporate Stabilization Fund; and approved the Agency’s 2014 operating budget and fee scale. The following is a summary of the Board’s actions.
Estimated Corporate Stabilization Fund Assessment and NCUSIF Premiums
The Board was informed by NCUA staff that the estimates for the total projected assessments for the Corporate Stabilization Fund are between $4.6 billion and $6.4 billion (at the end of the 2nd Quarter of the year). Staff also informed the Board that, through the end of the 2nd Quarter, $4.8 billion has already been paid to pay down the Corporate Stabilization Fund. This means that, as per NCUA staff estimates, there remains between -$0.2 billion and $1.6 billion left to be paid. Because the numbers that NCUA staff used in their briefing were from the 2nd Quarter, the recent settlement with J.P. Morgan Chase, which is expected to net the NCUA approximately $1.4 billion, is not included in Corporate Stabilization Fund calculations.
Based upon the current estimates for the Corporate Stabilization Fund, the NCUA staff informed the Board that they are projecting that there will be no Corporate Stabilization Fund assessments in 2014. The staff did note that if the projections do not hold, the staff could still recommend an assessment come July.
With regards to NCUSIF premiums, the NCUA staff informed the Board that they are projecting 2014 premiums between 0 and 5 basis points.
Final Rule: CUSO Reporting and Auditing
The final rule expands certain requirements that previously only applied to federally chartered credit unions to federally-insured state chartered credit unions (FISCUs). These requirements address accounting, financial statements, and audits. They also expand CUSO reporting requirements and limit the ability of “less than adequately capitalized” FISCUs to recapitalize their CUSOs. All CUSOs will be required to annually provide profile information to NCUA and, for FISCUs, the appropriate state regulator.
The final rule requires CUSOs that engage in what NCUA considers “complex or high-risk” activities to report more detailed information, including audited financial statements and general customer information. As per the rule, the Agency has labeled the following activities to be “complex or high-risk:”
- Credit and lending: business loan origination; consumer mortgage loan origination; loan support services, including servicing; student loan origination; and credit card loan origination.
- Information technology: electronic transaction services; record retention, security, and disaster recovery services; and payroll processing services.
- Custody, safekeeping, and investment management services for credit unions.
In addition to the extra reporting requirements, CUSOs engaging in credit and lending services will be required to report the following activity by loan type:
- The total dollar amount of loans outstanding;
- The total number of loans outstanding;
- The total dollar amount of loans granted year-to-date; and
- The total number of loans granted year-to-date.
Before investing in or lending to a CUSO, credit unions must obtain a written agreement from the CUSO indicating that it will:
- Account for all transactions in accordance with generally accepted accounting principles;
- Prepare quarterly financial statements; and
- Obtain an annual financial statement audit of financial statements by a licensed certified public accountant in accordance with generally accepted auditing standards.
NCUA acknowledged that all federally-insured credit unions with loans to or investments in CUSOs will be required under the final rule to make changes in the agreements they currently have with their CUSOs. Therefore, the effective date of the final rule was pushed out to June 30, 2014. CUSOs will begin submitting reports to NCUA when the Agency’s reporting system is fully operational (by December 31, 2015).
2014 NCUA Operating Budget and Fee Scale
The NCUA Board approved a 2014 budget of $268,290,296, which is an increase of $16.9 million (6.7%) over the 2013 budget. The 2014 budget increase is largely due to an $11 million increase in employee pay and benefits. The Agency noted that “[w]ith the federal pay freeze lifted for 2014, NCUA employees who have received no base salary increase for the past two or three years will receive an average merit increase of 4% based on performance.” The NCUA’s 2014 budget also reflects an increase in the Agency’s contracted services of $3.1 million (14.8%) over the 2013 budget. The largest increase in the NCUA’s contracted services is aimed at strengthening the Agency’s cyber-security to ensure compliance with the Federal Information Systems Management Act.
The 2014 fee scale for federal credit unions (FCUs) is as follows:
- FCUs w/ $1 million or less in assets will pay $0.
- FCUs between $1 million and $1,172,780,934 in assets will pay 0.018450% of their assets.
- FCUs between $1,172,780,934 and $3,548,817,485 in assets will pay $216,378.08 plus 0.005377% of their assets in excess of $1,172,780,934.
- FCUs in excess of $3,548,817,485 in assets will pay $344,137.57 plus 0.001795 of their assets in excess of $3,548,817,485.
For more information on the actions taken by the NCUA Board of Directors or other regulatory issues, please contact Ricardo Pineres (firstname.lastname@example.org).