NCUA: Budget Up, Assessments Down
ALEXANDRIA, Va. — In what was arguably the most important meeting of the year, the NCUA board approved a 6.7% in the 2014 operating budget, no projected corporate assessment for 2014 and a final CUSO rule. All items on the agenda received yes votes of approval from all three board members.
The NCUA’s $268 million operating budget includes a 6% increase in the cost of employee pay and benefits.
Of the 6% pay and benefits cost increase, employees will receive an average merit increase of 4%. Another 1.9% will be associated with promotions, staff realignments, and hiring and retention costs.
Travel expenses will increase by 2.3%, rent, communications and utilities will increase by 6%, administrative costs will increase by 13.1%, and contracted services costs will increase by 14.8%.
However, no new full time positions will be added next year, leaving the NCUA’s full time count at 1,262.50, the same as in 2013.
Regarding the budget increase, Chairman Debbie Matz said during the meeting the notion that fewer credit unions should mean a lower budget is a fallacy and a myth. Rather, she said, credit unions have grown larger and more sophisticated, and require more examiners. Additionally, credit unions have asked for expanded authorities they need, Matz said, which also requires additional examination.
Board Member Michael Fryzel raise the issue of one line item in the 2014 budget, a top secret room that is mandated for all federal regulators as the result of an executive order signed by President Barack Obama. The room, which requires 24-hour security and has other specific requirements, will cost approximately $1.6 million, funded out of the NCUA’s capital budget, to build next year.
Additional capital improvements next year, totaling $6.1275 milion, include the replacement of the roof at NCUA headquarters, online software development to support expanded data and reporting requirements, and additional IT upgrades.
The NCUA board also revealed an estimated range of zero for the corporate stabilization annual charge, assessed on all federally insured credit unions.
The figure is the direct result of a record $13 billion settlement the Department of Justice reached Nov. 19 with JPMorgan Chase that includes $1.417 billion earmarked for the NCUA.
The settlement resolves lawsuits the NCUA filed as liquidating agent against JPMorgan Chase, Bear Stearns and Washington Mutual for losses incurred by corporate credit unions as a result of the purchases of the faulty residential-backed mortgage securities.Of the record-breaking $13 billion resolution, $9 billion will be paid to settle federal and state civil claims by various entities related to residential mortgage backed securities sold by the bank and its acquired entities.
“The timing of the settlement couldn’t be better,” Matz said during the meeting.
Matz also said the settlement funds will be applied toward the corporate stabilization fund’s outstanding $3.9 billion balance with the U.S. Treasury.
The NCUA also projected a 0 to 5 basis point range for the 2014 NCUSIF premium.
Regarding the final CUSO rule, all of the credit union subsidiaries will be required make preparations to report basic profile information to the NCUA effective June 30, 2014. The reporting requirement will be rolled out as the NCUA builds a national registry to house the information. The registry will not be unveiled until the end of 2015.
CUSOs engaging in one of three high-risk business categories will also be required to report additional information, including audited financial statements and customer information. Those categories are credit and lending, information technology and custody, safekeeping and investment management.
NCUA Board Member Michael Fryzel said the rule, which took nearly three years to write and approve, was prompted by the corporate crisis and inability of the NCUA to determine basic industry information about CUSOs, including how many of the credit union subsidiaries exist.
Both Matz and Fryzel said the agency has been embarrassed when asked by members of Congress simple questions such as how many credit union CUSOs exist. Due to the NCUA’s lack of reporting authority the regulator does not know that answer, both board members said.The cost to develop the registry will be $750,000 in 2014, and will be funded out of the share insurance fund.