ALEXANDRIA, Va. — Federal credit unions will pay the NCUA anaverage of 6.7% more next year in operating fees and possibly asmuch as 12% more, based on
asset size, according to the rate structure approved by the agencyat its November meeting.
The fees will be based on asset size as of Dec. 31, 2008 and due nolater than April 15, 2009. The board approved the increaseunanimously with little discussion at the Nov. 20 meeting.
NCUA Deputy Financial Officer Michael McNeill said the increasedfees were necessary to finance additional costs of the agency'soperations, including changes to the examination cycle. He told theNCUA Board members that the assets of federal credit unions areprojected to increase 6.5% this year.
Most federal corporate credit unions will pay the same dollaramount in a fee. The only exception is for those with assetsbetween $750,000 and $5
million-their fee will be based on the natural person scale-meaningthat their dollar amount will increase by 6.7%.
In addition to paying more money, federal
credit unions will be examined more frequently by the agency.
The board revised the examination schedule so that all federalcredit unions will receive an “on-site supervision contact” every12 months, based on risks observed over a period of 10-14 months.Previously, the agency's target was one exam every 18 months forwell-capitalized, well-run credit unions, with an average of 16months between exams.
NCUA will closely monitor all CAMEL 3 and 4 federally insured,state-chartered credit unions and perform an on-site insurancereview within a targeted period of every 10-14 months.
NCUA Executive Director J. Leonard Skiles said the change wasneeded in light of the economic crisis credit unions are livingthrough because “experience shows there is value in frequentcontact.”
As a result of concerns raised by trade associations about theregulatory burden on credit unions and the higher costs, the agencyscaled back the scope of the changes to the examination cycle. Itwill not conduct full-scale examinations on all federal creditunions during a 12-month period and will only hire 50 newexaminers, down from the original proposal of 100 newexaminers.
Skiles said the changes “shift the emphasis to those credit unionswith higher risk levels.”
He noted that closer examination was needed because of the nation'seconomic woes and said that as of June 2008 there were 1,667 creditunions that reported losses. He also predicted that even when theeconomic recovery begins, it will take two to three years forcredit unions to work though troubled assets, which is why theagency needs to increase oversight.
NAFCU President/CEO Fred Becker said the agency's response to theassociations' concerns was a positive step but did not go farenough.
“I appreciate the chairman listening to our concerns as cuttingback somewhat on the proposed increase. At the same time wecontinue to believe that with modern technology and more frequentrequests for information on an as-needed basis, as well as the useof the rapid-deployment teams they are creating, that there aremore efficient ways to adapt to situations such as the present. Bythe time the staff hired are trained and seasoned (several years asthey have noted), the effects of the current crisis will havedissipated,” he said in an e-mail response.
The changes in the examination cycle are the biggest factor in the12% increase in the agency's budget that the board approved at themeeting.
The budget, which takes effect Jan. 1, will be $177.8 million, upfrom $158.6 million this year. Agency officials had originallyplanned on requesting $182.9 million but reduced the figure byscaling back the proposed examination plan and also reducing thefunds allocated for the celebrations of the 75th anniversary of theFederal Credit Union Act.
Another key initiative of agency plans for next year iscentralizing the chartering process away from the regional officesinto the headquarters.
The board also approved language implementing changes mandated byCongress in 2005 to clarify the definition of a credit union's networth during a merger for purposes of prompt corrective action. Itdefines a credit union's net worth as a retained earnings balanceof the continuing credit union combined with the merging creditunion's retained earnings.
Board members also approved changes in the credit union charteringprocess that clarify the procedures for determining whether an“underserved area” qualifies as a “local community.” It alsoaddresses how certain economic and demographic data can be used todetermine if an area that combines geographic units qualifies asunderserved.
The regulation also explains the data needed to show that aproposed area has “significant unmet needs for financialservices.”
In addition, the board gave final approval for the NCUA to usemedian (rather than average) household income to determineunderserved areas.
The agency rejected suggestions by CUNA and NAFCU that all existinglow-income credit unions be permanently grandfathered in aslow-income credit unions. Instead, those credit unions will havefive years to prove their qualifications.
The NCUA proposed the rule change after its Outreach Task Forcedecided on recommendations to help the agency encourage creditunions do more to serve the underserved. The task force was theresult of criticisms of the lack of credit union data regardingservice to the underserved by then-House Ways and Means CommitteeChairman Bill Thomas (R-Calif.) and by the GovernmentAccountability Office, Congress' investigative arm.
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