NCUA Estimates 35 BP in Assessments; Ups Budget By 12%; Issues Corporate Rule
ALEXANDRIA, Va. -- Credit unions should budget for 20-35 basis points worth of additional assessments next year, the NCUA said today.
The premium to shore up the NCUSIF will likely be between 0 basis points and 10 basis points. This year the premium was 13.4 basis points.
The assessment to repay part of the Treasury Department's loan to the Temporary Corporate Credit Union Stabilization Fund will likely be between 20 and 25 basis points. This year the premium was 12.4 basis points.
Agency officials said the final figures, which will likely be announced during the second half of next year, will depend on factors such as the impact of the economy on credit unions and the number of credit union failures.
Matz said the agency is doing all it can to minimize losses to the NCUSIF, including beefing up its examination program. The budget approved by the board today includes additional 78 new full-time equivalent positions, including 53 new field examiners and six new supervisory field examiners.
Officials of CUNA and NAFCU both said that given the range of anticipated assessments the agency should spread them out over a number of years to lessen the impact on credit union balance sheets
The NCUA Board approved a 3.4% increase in the asset level dividing points for natural person federal credit unions to be used when determining the agency's operating fee scale. But the board decreased the natural person federal credit union operating fee rates by 2.86%.
The board also approved increasing the Overhead Transfer Rate--what the agency transfers from the NCUSIF to the agency to pay for the agency's insurance-related operations--58.9%, from this year's level of 57.2%. The agency said the increases are needed because of increased staff time devoted to examinations. Examiners have reported that 67% of their time is spent on insurance-related procedures.
The board also approved a $225.4 million budget for 2011, which is 12% higher than this year's budget of $200.9 million.
Among the notable increases are 3.4 million in pay, benefits and travel to continue the annual examination program; $1.6 million for new personnel and outside professionals for the office of the chief financial officer; a $1.2 million increase in the travel budget; and an additional $937,000 so the Office of Inspector General can engage outside professionals to conduct material loss reviews and independent financial statement audits.
NAFCU President Fred Becker said that "at a time when the country is at war and the soldier who just won the Medal of Honor for risking his life to save his comrades can only look forward to a 1.9% pay raise, it is outrageous that the NCUA is raising salaries at a higher rate.''
The board also sent out for a 30-day comment period a proposed corporate credit rule that would limit natural person credit unions to joining one corporate, sets up a system-wide risk mitigation committee and requires each corporate to form a risk management committee.
It would also allow corporates to assess annual membership fees and increase the amount of retained earnings and would mandate that the corporate prepare an annual management report that assesses how well it is in compliance with NCUA regulations and an assessment of its internal auditing and control structure.
The rule would also request that corporate credit union members that are not federally insured make a voluntary payment to the Temporary Corporate Credit Union Stabilization Fund. If the organization doesn't make a payment, the corporate must call a meeting to determine if it should be expelled from the corporate.
NCUA Board Member Gigi Hyland said the provision allowing membership in only one corporate "could be problematic'' because it would limit competition and limit credit unions' right to choose.
CUNA Senior Vice President Mary Dunn said the provision would harm corporates by limiting their ability to raise capital and could make them financially weaker. She also said the language on levying assessments on non-insured corporate credit union members is too vague.
The NCUA also sent out for 30-day comment a technical correction to the corporate credit union rule approved in September. It revises the definition of collateralized debt obligation--a class of investments that corporates can't invest in--to exclude commercial mortgage-backed securities, securities guaranteed by the government and securities collateralized by securities that are guaranteed by the government.
NCUA chief financial officer Mary Ann Woodson told the board that the NCUSIF has had a net income of $323.5 million this year.
Because of the growing number of troubled credit unions, the agency's insurance loss expense has been $694.3 million this year, compared with a $625 million projection.
The fund's equity ratio was 1.29% at the end of October, compared with 1.18% at the end of September.
At the end of October, 18.83% of insured shares were in CAMEL 3 credit unions, compared with 18.869% at the end of September. There were 1,774 CAMEL 3 credit unions at the end of October, compared with 1,769 at the end of September.
Woodson also reported that 5.20% of insured shares were in CAMEL 4 and 5 credit unions at the end of October, compared with 5.32% at the end of September. There were 378 CAMEL 4 and 5 credits at the end of September, compared with 374 at the end of August.
There have been 27 failures of federally insured credit unions through October, including 17 involuntary liquidations. There have been nine purchase and assumptions and 10 assisted mergers. There were 28 failures in 2009.