On Wednesday, the NCUA scheduled a public briefing on the agency’s 2017-2018 budget on Oct. 27, following the monthly board meeting. The NCUA will provide a livestream broadcast of the event for those who are unable to attend in person.
A draft budget will be provided the week of Oct. 9, which will enable the community and other interested participants an opportunity to review the proposal prior to offering their input.
This is good news for credit unions. However, when it comes to the budget, the NCUA can do better.
During my tenure, credit union leaders have told me repeatedly that they care deeply about the agency’s budget and budget process, and rightly so. Credit unions bear nearly all NCUA operating costs and the funding of National Credit Union Share Insurance Fund.
While material steps have been taken toward greater transparency – such as the briefings and more budget information provided on the NCUA’s website – the community and Congress deserve even more transparency and accountability. Additionally, the NCUA’s budget is inefficient, as demonstrated by the regular increases under the past administration. The 2017 budget approved in November is $302.9 million, up from $236.8 million just five years ago.
I have yet to vote for an agency budget since joining the NCUA board in August 2014. In dissenting last fall on the current and 2017 budgets, I urged the board to consider a public hearing and take additional steps to achieve transparency and cost effectiveness, such as:
- Extend the exam cycle and improve exam efficiencies (A review of these issues is now underway). This must include revamping the exam appeals process.
- Collaborate more with state regulators to pursue exam goals.
- Employ actual zero-based budgeting, which should result in reduced costs.
- More closely scrutinize any agency office that receives an annual increase of more than 3%.
- Change the way the NCUA sets the Overhead Transfer Rate (this review is also underway).
- Do not utilize a two-year budget process.
- Disclose all legal fees related to the corporate credit union stabilization litigation and settlements, and how the agency is using those proceeds.
- Reconsider the need for stress testing credit unions with more than $10 billion in assets and the BlackRock methodology employed in such tests.
- Disclose all credit union losses greater than $5 million (instead of the current level of greater than $25 million).
I will continue to press for the best outcome on these matters.
Regrettably, the politicization and routine increases of the NCUA’s budget have drawn the attention of Congress, most notably in a hearing last July before a subcommittee of the House Financial Services Committee. Legislation remains pending in the House (H.R. 2287, which passed the committee) and Senate (S. 924) that would force the agency to conduct hearings on its budget, as it should have been doing all along.
Under the Federal Credit Union Act, Congress established the NCUA’s funding mechanism. It reflects that credit unions are key stakeholders, not only because the NCUA regulates them, but also because credit unions provide the agency’s resources. It is a workable system, yet it is up to the NCUA board to exert leadership over the budget and budgetary process. We must ensure our authority is never abused and that we do not keep credit unions in the dark.
After all, it is their members’ money that funds the agency.
J. Mark McWatters is a member of the NCUA board. He can be reached at mmcwatters@ncua.gov.
