NASCUS Testifies at NCUA Budget Briefing


October 21, 2022 — The National Association of State Credit Union Supervisors (NASCUS) testified yesterday during the National Credit Union Administration (NCUA) Board budget briefing. As mandated by Congress, the NCUA Board held its hearing on the staff draft budget for 2023 and 2024. The hearing’s roundtable format allowed for an exchange of testimony with a segment of questions and answers between stakeholders and the NCUA.

“This hearing presented an opportunity for open conversations that foster transparency and offer a greater understanding of the underlying principles of the budget by providing the NCUA the state system perspective,” commented NASCUS President and CEO Brian Knight.  “NASCUS commends the NCUA Board on the format of the briefing and continuing to hold the briefings in a public manner.”

During the briefing, NASCUS Senior Vice President of Policy and Supervision John J. Kolhoff and Vice President of Legislative and Regulatory Counsel Nichole Sebron provided a state system perspective to the NCUA board and executive team.

NASCUS comments focused on a lack of recognition the draft staff budget afforded the state surveillance programs and the state-chartered institution that funded those contributions.  For example, the state agency efforts lower the NCUA’s budget needs by supporting the SIF’s directive to ensure safety and soundness in the credit union system.

“The 45 NASCUS State Regulator members are the prudential regulators of all 1,915 state-chartered credit unions across the country, and their 64 million members represent half of the assets and members in the domestic credit union system. NCUA, and the Share Insurance Fund (SIF), benefit tremendously from the contributions of state regulators, and that state supervision is, in turn, almost exclusively funded by state credit unions: not the SIF, nor NCUA,” Kolhoff stated.

With respect to further refinement of the Overhead Transfer Rate (OTR) methodology, NASCUS wants to ensure the cost savings afforded by the state programs are appropriately recognized.

“The work done by state regulators directly benefits the SIF, reducing its administrative costs and maximizing funds available to cover losses or generate revenue to be repaid to all insured credit unions. Through the current Overhead Transfer methodology, however, the cost-benefit with respect to federal charters works in reverse: the SIF absorbs costs for supervising federal credit unions, and the benefit flows to the federal charter,” Kolhoff commented.

NCUA Board Member Rodney Hood asked NASCUS to share feedback on virtual exam functionality. Kolhoff responded, “It’s an exciting time in credit union regulation because COVID forced all of us, all the state regulators and credit unions, to conceive of different ways to get the job done. For credit unions, this resulted in additional safety and soundness concerns but also strengths. And for regulators, with the opportunity to make those changes, it also taught us a lot of lessons that we can utilize moving forward.”

NASCUS is continuing to evaluate the budget and will be submitting more detailed written comments, along with recommendations, by the October 28th deadline.

NASCUS’s entire testimony can be read here.

The NCUA Budget Briefing can be watched in its entirety here.

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