Credit Union Examinations Lack Consistency, Trades Tell Agency Board
During the board meeting, officials from NAFCU, CUNA and others say they're hearing complaints about problems with examinations.
Credit unions are complaining that NCUA examinations are consistently unpredictable and inconsistent, placing a large and unnecessary regulatory burden on institutions, the two largest credit union trade groups told the agency’s board Wednesday.
“Inconsistency in the interpretation and application of rules and regulations are especially challenging for credit unions that have new examiners,” CUNA Chief Economist Mike Schenk told the board during its annual budget hearing. “These inconsistencies can throw strategic plans off track resulting in significant service disruption and misallocation of resources.”
The problem has been exacerbated by the consolidation of NCUA offices, resulting in some credit unions having new examiners, he added.
Curt Long, NAFCU’s chief economist and vice president of research said the group’s members also are complaining about problems with examinations.
“In recent years, while the pace of rulemaking has slowed, the burden on the examination side has increased,” he told the board. “Although reducing regulation has improved flexibility, NAFCU’s member credit unions have found that consistency and certainty have also decreased.”
He urged the agency to adopt a plan in which credit unions with $3 billion in assets or lower would be eligible for an 18-month exam cycle. That threshold is now $1 billion.
The two made their comments, as NCUA CFO Rendell Jones outlined the agency’s proposed 2020-2021 budgets. They were joined on a panel by NASCUS President/CEO Lucy Ito.
The NCUA has proposed a 2020 agency operating budget of $316.2 million, an $11.8 million increase over the board-approved 2019 budget.
That amounts to a 3.9% increase over 2019. The operating budget is projected to increase to $326 million in 2021.
Overall, the agency proposed a 2020 budget of $347.7 million, a $3.9 million boost over the board-approved 2019 budget.
Jones said that a significant factor in the increase is a boost in mandatory contributions that all federal agencies must make to the Office of Personnel Management for the Federal Employee Retirement System.
Long also criticized a proposal by board member Todd Harper to hire three additional staff members to help develop a consumer financial protection examination program.
“While this proposal may be well-intentioned, CUNA and our members believe altering the agency’s risk-focused examination process and substantially increasing examination-related expenditures is not warranted,” he said.
He said there has been no evidence presented to suggest a need for such a program.
Long was critical of the agency for consistently increasing its budget, while the number of credit unions has declined. He urged the NCUA to institute cost-benefit analyses as it looks at its programs.
“As has been said in the past, the NCUA examines and supervises credit unions, not assets,” he added
Schenk, on the other hand, said CUNA officials believe the agency’s budget increase is “reasonable.”
Ito focused many of her comments on the agency’s Overhead Transfer Rate, saying that while the agency has been more open about how the rate is calculated, it is impossible to determine, based on the budget, why the agency is a proposing an increase.