NASCUS: Contributions of State Regulators Overlooked in NCUA Budget

Acknowledgement of state fees is relegated to footnote.

David Baumann


Nov 24



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David Baumann

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David Baumann

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NCUA Budget

In its proposed 2024 budget, the NCUA underestimates the contributions that state-chartered credit unions and their state regulators make to ensuring the safety and soundness of the credit union system, John Kolhoff, NASCUS’s senior vice president of policy and supervision, recently told the agency.

Kolhoff said that the NCUA’s proposed budget notes that state credit unions pay only 30.8% of the NCUA’s operating budget, with only a “mildly” worded footnote acknowledging that those financial institutions pay a supervisory fee to their state regulators.

State Expenses ‘Misrepresented’

“In the narrow context of the direct funding of the NCUA budget this may be true, but it significantly misrepresents the material expenses borne by state credit unions to fund supervision, understates the significant reliance of those programs by the [Share Insurance Fund], and presents an incomplete picture of the beneficial impact state supervisory programs have on the SIF,” Kohlhoff said, in written and oral testimony submitted to the agency board.

The NCUA board held a hearing on its 2024 budget on Nov. 16, with witnesses from several trade groups, as well as Kolhoff testifying.

NASCUS and the NCUA frequently spar over the agency’s Overhead Transfer Rate—the methodology used to allocate insurance-related expenses to the Share Insurance Fund. All federally insured credit unions, including state-chartered institutions, are assessed fees based on the OTR.

OTR Reduction Nice, But Not Enough

In his testimony, Kolhoff said that NASCUS was pleased that the NCUA had reduced the OTR by 60-basis points but added that the OTR reduction was not sufficient.

He said that the 46 state and territorial credit union supervisory agencies are the prudential regulator for about 2,000 state-chartered credit unions representing 68 million members. Those credit unions hold slightly more than half of the assets in the U.S. credit union system. Based on Dec. 2022 call report data, state-chartered credit unions paid $94 million in operating fees to their state regulator, while federal credit unions paid $109 million to the NCUA.

“NCUA, and the SIF, benefit tremendously from the supervisory efforts of state regulators,” he said. “State supervision is primarily funded by state credit unions: not the SIF, nor the NCUA.”

Kolhoff said that much of the work done by state regulators is safety and supervision efforts that benefit the share insurance fund. The NCUA relies on that work and it saves the agency the direct costs of onsite exams.

NASCUS has said in the past that when it comes to state-chartered credit unions, the NCUA’s sole concern should be mitigating risk to the insurance fund.


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