NCUA Board reduces, sets final 2021-2022 budget, OKs FCU op fee assessment rule changes; OTR methodology adjusted

With barely two weeks left in 2020, the National Credit Union Administration (NCUA) Board on Thursday approved the agency’s final budget figures for 2021 and 2022 and approved a final rule that will, in time for the 2021 assessments, make some changes in how federal credit union (FCU) operating fees will be calculated.

The board also approved issuing a notice that explains adjustments made in the overhead transfer rate (OTR), which reflects the portion of agency expenses that are attributed to the share insurance function.

The final budget was approved on a vote of 2-1, with Board Member Todd Harper voting against and the board’s newest addition, Member Kyle Hauptman, voting with Chairman Rodney Hood in favor of the final budget plan.

Harper had concerns about the budget proposed this fall, and those concerns apparently were not allayed by the final budget plan.

During the meeting, Harper noted continued concerns about the agency’s thin staffing related to the consumer protection compliance function as well as the absence of any special plan, such as one he proposed, for the agency to examine a number of credit unions identified as high-risk. He noted particular concern about uncertain impacts on credit unions once pandemic-related forbearance programs expire.

“We know the risks are there. We should plan to check in with these credit unions next year,” Harper said. Harper said the agency should also examine all federally insured credit unions with $500 million or more in assets regardless of charter type. He also said he proposed adding 36 additional examiners to ensure examinations of those institutions above that threshold that are not already slated for exams in 2021.

Harper also pointed out that unlike the NCUA, which is reducing its overall budget next year, the Federal Deposit Insurance Corp. (FDIC) has increased its budget 12.9% for 2021 and added examiners and resolution staff to address future problems.

“We have a duty to credit union members and taxpayers to protect the share insurance fund and the credit union system. We have a duty to prepare for any economic fallout,” Harper said. “We need to modify our examination program, and we need to increase our examiner ranks at least on a temporary basis, to work through the anticipated problems. Regrettably, the budget falls short.”

For that reason and more, he said he would oppose the final budget.

To sum up, in Thursday’s open meeting, the board:

  • Approved a 2021 budget of $341.4 million, down 1.7% from 2020; and a 2022 budget of $343.5 million, up 0.6% from 2021. (The 2021 final budget is about $1.1 million less than proposed; the 2022 final budget is $20.7 million lower than proposed.) The operating fee rate applied to federal credit unions, based on the final budget justification document, is reduced 19.6% for 2021. The fee scale for corporate credit unions is unchanged.
  • Approved a final rule on federal credit union operating fee assessments that excludes from total assets used in calculating the fee any loan an FCU reports under the Small Business Administration’s Paycheck Protection Program (PPP) or similar future programs approved for exclusion by the NCUA Board; deletes from the current regulation references to the Credit Union System Investment Program and the Credit Union Homeowners Affordability Relief Program, both of which no longer exist; and amends the period used for the calculation of an FCU’s total assets. Under the final rule, total assets will be calculated as the average total assets reported on the FCU’s previous four call reports available at the time the NCUA Board approves the agency’s budget for the upcoming year, adjusted for any excludable programs as determined by the agency board.
  • Approved issuing a notice of adjustments in the overhead transfer rate (OTR) methodology. The OTR, set at 62.3%, is the portion of agency expenses attributed to the agency’s share insurance work.

The final rule on FCU operating fee assessments will be effective 30 days after publication in the Federal Register.

Final rule – FCU operating fees

Notice – Overhead transfer rate

Board action memorandum – 2021-2022 budget

NCUA 2021-2022 budget justification (Dec. 18, 2020)

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