Becker: Reduced Loss Estimates Should Mean Lower Corporate Assessment
NAFCU President/CEO Fred Becker said by the NCUA’s own determining factors, the 2013 corporate assessment range of between 8 to 11 basis points should be reduced.
Responding to news that the NCUA reduced the high end of estimated remaining corporate assessments by $900 million, Becker said the high annual assessment doesn’t make sense.
The NAFCU boss said the cost of borrowing $5.1 billion outstanding from the U.S. Treasury – one of the determining factors the NCUA says board members use when setting the annual assessment – is lower than the rate of inflation.
Credit unions should be allowed to use those low rates to their advantage, repaying corporate stabilization costs more slowly with a smaller assessment, Becker said.
Additionally, Becker said the NCUA’s own examiners are pressuring credit unions to reduce expenses.
“ROA has not returned to what it was before the crisis,” Becker said. “Capital has improved, but examiners are still voicing concerns at many credit unions. Although things are improving, we’re still not there yet.”
Becker pointed out the NCUA’s operating assessment increased this year, which is another hit credit union financial reports will have to absorb. Although it’s likely the federal pay freeze will hold and the NCUA will reduce its budget mid-year, Becker said the regulator won’t return the assessment money.
“Looking at their own criteria, there’s no reason the assessment should be between 8 and 11 basis points,” he said.
CUNA reported its Chief Economist Bill Hampel said that the revised $2.75 billion midpoint of estimated remaining corporate assessments could be fully paid with just over three assessments at last year's rate of 9.5 basis points of insured shares.
If spread over nine years, the annual assessment would only be about 2.5 basis points, he said.