Several factors will determine the final costs, including the outcome of litigation that the agency has filed against three investment banks seeking damages for having provided the corporate credit unions incomplete information when selling them residential mortgage-backed securities.

Fazio said that credit unions can budget for the increase but can't book it until they make the payment next summer or fall.

In response to a question, Matz said the agency will determine if there needs to be an NCUSIF assessment based on its projections of how many credit unions will fail. She added that the agency uses a mathematical formula to make its decision. 

NCUA General Counsel Michael McKenna said that any credit union that converts to private insurance or a mutual savings bank next year would still have to pay its share of the corporate credit union assessment for next year. However, federal law doesn't allow the agency to charge a credit union that leaves the insurance fund any additional assessments for subsequent years, he added.

Matz also announced that the agency's budget next year, which the NCUA board is scheduled to discuss and vote on at its Nov. 17 meeting, will rise by "single digits." This year's budget is $225.4 million, a 12% increase over last year.

NAFCU President/CEO Fred Becker said he was pleased the increase is going to be smaller, but said he wishes the agency "would watch its spending even more given that these are difficult economic times for credit unions. Every penny of the agency's budget comes from credit unions."

Matz said the double-digit budget increases during the past two years (which increased spending by a total of $48 million) were necessary to protect the system's safety and soundness. The agency used the additional funds in part to increase the frequency of examinations to once a year for all FCUs and for state-chartered federally insured credit unions with assets of $250 million or more.

She estimated that the additional exams saved the insurance fund approximately $1.5 billion because agency staff members were able to catch some of the problems facing credit unions earlier. This avoided the agency having to close more credit unions.

In response to a question, she said the agency has no plans in the near future to allow CAMEL 1 and 2 credit unions to be examined every 18 months, which both CUNA and NAFCU have pushed for.

Matz explained that the financial condition of a credit union can change rather quickly, and therefore the agency needs to keep a close eye on them. 

Fazio said that the agency hadn't made any decision about whether to require stress testing of large credit unions, as the FDIC has mandated for the biggest banks.

He said staff members are reviewing a range of challenges and issues regarding the regulation of larger credit unions because of the potential cost to the NCUSIF if they fail. His office will make recommendations to the NCUA board next year.

In Matz's opening comments and in response to questions, she said the agency's proposed rule for regulating CUSOs would improve the industry's safety and soundness. She said that the agency is the only federal financial regulator without the authority to examine third-party vendors, so it has to find out about them through the back door.

Fazio said financial information about CUSOs is currently hard for the agency to monitor, and the proposed rule would require the information to be centralized.

NCUA staff members are reviewing comments to the proposed rule and are likely to issue a revised rule early next year.