Onsite Coverage: Fees Could Offset 87% of Derivatives Program Costs
ALEXANDRIA, Va. — An application fee proposed by the NCUA could offset as much as 87% of all costs to implement expanded derivative authority through 2014.
The NCUA Board approved a proposed rule Thursday at its monthly board meeting that would permit qualified credit unions to invest in derivative swaps and caps for the purpose of mitigating interest rate risk.
The fees would range from $25,000 to $50,000 for credit unions seeking Level I authority, and $75,000 to $125,000 for those seeking Level II authority, which would allow a higher transaction limit but would also require more supervision scrutiny.
The extent to which the fees would offset the costs of the program depends upon how many credit unions apply for the expanded authority. If the lower end of the NCUA’s estimated 75 credit unions apply, the fees could bring in as much as $5.25 million, which would cover 95% of one-time costs estimated for the program, and 70% of total costs.
Should 150 credit unions apply, the high end of the NCUA’s estimated participation figures, the regulator could pull in up to $10.5 million, which would cover 128% of one-time costs and 87% of total costs.
In its Board Action Memo, the NCUA said the fee would be nonrefundable and due at the time of application. The NCUA board may also consider discounting the application fee if a credit union already has Level I authority and is attempting to upgrade to Level II, provided it has demonstrated a successful record of sound derivatives management for at least one exam cycle.
The board is also considering charging an ongoing supervision fee to cover the costs of expanded supervision costs directly attributed to derivatives. The cost of the program in 2015 and beyond is expected to be between $2 and $3.85 million.
The agency is requesting feedback from the industry regarding whether the fee would be assessed as a standardized operating fee paid by all participating credit unions, or based upon actual or estimated resources required for derivatives supervision.