NCUA Plans to Eliminate Fixed-Asset Cap

The National Credit Union Administration (NCUA) Board approved reductions of $1.1 million in its 2014 operating budget. During the meeting on July 31, the board also proposed a rule providing federal credit unions greater flexibility to manage their fixed assets, and gave an upbeat report on the state of the share insurance fund. The performance of the share insurance fund could lead to an overhead transfer that will help offset credit union assessments.

“The headline from the meeting was the reaffirmation from NCUA that there will not be a Corporate Credit Union Stabilization Fund Assessment this year, and even that a rebate in 2021 is possible,” said John Trull, director of regulatory affairs for the Northwest Credit Union Association.

In spite of the reductions in the spending program, Trull noted, NCUA’s total 2014 budget will be $273,317,808 — a $25 million increase year over year. Nearly all of the operational increase is due to a $16 million increase in employee pay and benefits.

“Credit unions want seasoned examiners and understand the need to pay competitive salaries,” Trull said. “But expect some disagreement from the industry because of the regulator’s trend of increased spending year over year, particularly when examiners are going into credit unions and requiring that they focus on operational efficiencies.”

The NCUA indicated that the $1.1 million in budget reductions will be used to offset next year’s budget and reduce operating fees assessed to credit unions.  

As expected, the NCUA proposed a fixed asset rule that will give federal credit unions more autonomy to manage their fixed assets. Specifically, federal credit unions will no longer have to seek a waiver to exceed the 5% aggregate limit on investments in fixed assets, as long as the investments are in line with the credit unions fixed asset management policies.

The policies must:

  • Be approved by the board with a set aggregate limit;
  • Have internal controls that demonstrate appropriate pre-acquisition analysis to ensure the federal credit union can afford any impact on earnings and net worth levels; and
  • Have ongoing monitoring and board oversight.

The plan is subject to supervisory scrutiny.

More information about the July 31 NCUA Board meeting can be found on the agency’s website.

Questions about this story? Contact Lynn Heider: 503.350.2225, lheider@nwcua.org.

Posted in Advocacy News, Federal, NCUA.