NCUA Board Projects Budget Savings, Proposes Closing Stabilization Fund and Providing a Distribution in 2018

7/25/17

From budget savings to the early closure of the Temporary Corporate Stabilization Fund, the discussions held at the National Credit Union Administration’s July board meeting could have a substantial impact on credit unions’ bottom lines. Following are details on the meeting’s key outcomes.

Closing the Temporary Corporate Stabilization Fund

During the meeting, the NCUA board unveiled a plan to close the Temporary Corporate Stabilization Fund at the end of September—years ahead of the original 2021 closure date. Under the proposed plan, federally insured credit unions would avoid a possible Share Insurance Fund premium this year, and the regulator is seeking input on a Share Insurance Fund distribution of $600 million to $800 million in 2018.

“As part of this proposal, the NCUA would raise the Share Insurance Fund’s normal operating level to account for the remaining obligations of the Corporate System Resolution Program,” NCUA Board Chairman J. Mark McWatters said. “Even with the proposed increase to the normal operating level, the NCUA is projecting a return of excess equity to insured credit unions through a distribution from the Share Insurance Fund in 2018.”

On Aug. 9, the NCUA will host a free webinar discussing the plan to close the fund. More details and the agency’s request for comments on the proposed plan can be found here.

Share Insurance Fund Report

This meeting also delivered a status update on the Share Insurance Fund. The report had added significance this year, given the potential losses for credit unions that primarily fund taxi medallions.

However, the fund performed better than anticipated, with expenses coming in much lower than expected during the first half of 2017. Expenses for CAMEL 4 and 5 credit unions increased slightly, but assets held in CAMEL 1 and 2 credit unions increased to 95.2 percent.

“This is a big deal for credit unions who were anticipating having to pay an assessment this year,” said John Trull, the Northwest Credit Union Association’s AVP, Regulatory Advocacy.

Budget Savings and Regional Office Consolidation

In the meeting’s midyear budget review, the NCUA projected $5.8 million in savings. This figure included $2.5 million dollars in savings due to a reduction of staff benefits equivalent to 50 full-time employees, and $1.4 million in reduced travel expenses after a temporary travel freeze.

The NCUA also announced its intention to restructure its operations. The agency’s five regional offices will be consolidated into three by closing the Albany, New York, and Atlanta, Georgia offices, and eliminating four of the agency’s five leased facilities. This will likely result in long-term costs savings by reducing the administrative and operational costs associated with maintaining regional offices.

Other restructuring recommendations the Board approved included creating an Office of Credit Union Resources and Expansion by redefining and realigning chartering and field-of-membership, credit union development, grants and loans, and minority depository institutions programs; restructuring the Office of Examination and Insurance into specialized working groups; and realigning the Asset Management and Assistance Center.

“I am impressed with the NCUA’s ability to reduce expenditures while maintaining a high level of service to credit unions and tackling big initiatives such as exam efficiency, agency restructuring, and rule development,” said Trull. “An initiative like this takes strong board leadership, and a willingness to execute at the staff level. NCUA examiners have encouraged credit unions to reduce operational expenses, advice that is more palatable when the agency is leading by example.”

Questions about the results of the NCUA’s board meeting? Contact John Trull, the Northwest Credit Union Association’s AVP, Regulatory Advocacy, at jtrull@nwcua.org.

Posted in Advocacy News, NCUA.