ARLINGTON, Va. -The reaction by credit union trade associations to NCUA's most recent modifications to its overhead transfer rate seem strangely muted, given the lightning rod the OTR has been in recent years. The OTR is the overall proportion of its budget that NCUA allots to itself to defray the costs of managing and operating the National Credit Union Share Insurance Fund. The OTR has been a perennial subject of controversy as state chartered credit unions and their regulators have charged the agency's calculation overcharges state chartered institutions for their insurance and subsidizes federally chartered credit unions. By contrast, federally chartered credit unions have generally charged that the calculation fails to recognize the true cost the NCUSIF represents to the agency and that, as a result, their operating fees have remained too high. But this year, as the agency cut the OTR from 62% to 59.8% and announced that it would review the calculation annually in the future, the air remained free from the often rancorous rhetoric which has characterized the discussion in the past. "We want to emphasize how much we appreciate the agency's willingness to move forward on this issue and to really look at some of the hard issues involved," said Mary Martha Fortney, NASCUS' acting President. "We have been talking about this issue for a long time and while our deeper issues with the OTR calculation remain, it is clear that this is a good step forward." Fred Becker, President of NAFCU, echoed some of Fortney's comments in language that appeared to almost pick up on NASCUS' tone. "NAFCU has, over the past month-and-a-half, had a number of discussions with the NCUA regarding the new method approved for the OTR," Becker said. "It is clear that NCUA's new method for the calculation of the OTR is a considerable step forward in that direction and that is a more precise means of allocating costs between the NCUA and the NCUSIF." CUNA did not have an official reaction to the change in the calculation as of press time, but Mary Dunn, CUNA Associate General Counsel for Regulatory Affairs praised the greater transparency the calculation now has. "I think it's more transparent. One thing that might cause everybody to pause is the math." CUNA has pledged to make the formula it uses to calculate the OTR available on its Web site. As of press time it still had not done so. How NCUA Did It A combination of NCUA's attention to the results of previous studies of the OTR calculation process, combined with a willingness to listen on the issue and to keep its costs down appeared to have been the principle things that the industry found praiseworthy in the OTR announcement this year. Both NASCUS and NAFCU appeared to praise NCUA's willingness to adopt measures recommended by the 2001 Deloitte and Touche study of how the agency calculates the OTR. NASCUS praised the agency's "movement to a more intensive and transparent OTR process" while it did not mention the Deloitte study by name. NAFCU cited NCUA Board Chairman Dollar's previous praise of the study and the General Accounting' Office's refusal to recommend that the agency scrap its overall OTR calculation method in a November 7 letter to NCUA Executive Director Leonard Skiles. Both sides appeared to acknowledge the role NCUA's budget cutting has played in taking a lot of the energy out of the issue. Speaking to reporters, Becker estimated that many credit unions don't understand the OTR and that most of his membership considered the overall NCUA budget to be the bigger issue. "We have reached the point where the OTR number, more or less, is what it is," Becker said. CUNA Chief Economist Bill Hampel joked with reporters about the new formula, noting that its complications guaranteed him and other credit union economists even more work. But despite the complications in it, he maintained that releasing it will be a good first step in making credit unions more comfortable with how the agency comes to the figure that it does each year. He also praised the agency's decision to revisit the topic annually, noting that this tripled the number of times credit unions have to review the data and address the issue. Hampel clearly appeared to believe that as more time passes, the OTR would lose even more of its energy as an issue, but both NASCUS and NAFCU made it clear that they still took issue with parts of it. NASCUS made a point of restating its observation that the current OTR left intact NCUA's assumption that it had the authority it needed to set the OTR. The position that the Federal Credit Union Act contains real limitations as to the costs to be borne by the insurance fund has been supported by CUNA's legal department in 2001 as well as by a study NASCUS funded, the organization said. For its part NAFCU appeared ready to squabble about changes at the edges of the -OTR issue. The November 7 letter to Skiles took issue with the amount of what it called "direct" expenses the NCUA incurs on behalf of the state examiners, as well as how the agency addresses its support of the state supervisors in the formula. NAFCU also took issue with how NCUA might need to better account for the space the agency provides a NASCUS employee at the NCUA headquarters as well as salary. The employee is only partially paid by NCUA and coordinates the educational effort between NASCUS and NCUA. -


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