MCUL Questions NCUA Budget Increases, Recent Actions in Letter to Agency (Misc News: December 8, 2010)
MCUL & Affiliates CEO David Adams sent a letter Tuesday to NCUA board Chair Debbie Matz calling into question aspects of the agency’s 2011 budget, which represents a 12-percent increase over the 2010 budget.
The NCUA board approved a budget increase of $24.5 million to pay for additional staffing for the new Annual Examination Program, the new Office of Minority and Women Inclusion, funding for the Office of Consumer Protection, as well as staff raises averaging more than 6 percent.
Adams called the increases too much.
“As credit union consolidation continues at a rapid pace, and given the effectiveness of our state regulatory agencies, I see these increases as excessive,” he said. “They will only place more financial pressure on the credit unions that must fund the agency’s expanded budget.”
Click here to read Adams letter to the NCUA.
The NCUA is adding 78 additional staff to augment state regulatory offices, which it believes to be deficient, Adams said. He said that the agency’s concerns about the state regulators’ offices, such as Michigan’s own Office of Financial and Insurance Regulation, are unfounded.
“The stated rationale from NCUA staff is that state CU regulators' resources are very thin and NCUA is concerned that they may not flag issues soon enough,” Adams said. “This is an arbitrary and, I believe, unsupported position.
“We think NCUA’s addition of this number of field staff and the increase in the frequency of examinations may be an overreaction by NCUA confined to serious situations in certain parts of the country, but of questionable benefit to credit unions generally here in Michigan where, despite extraordinary economic conditions, our credit unions remain strong and resilient.”
Adams asked what the agency is doing to tighten its own belt, as it has asked credit unions to do.
He asked if any of the new programs can be deferred until the economy improves and whether there is a mechanism to reverse the programs once the economy turns around and concerns that triggered the NCUA actions are reduced.
Adams also questioned the timing of the 6.1-percent average pay increase.
“(The pay increase) also seems out of line in an economic environment where credit unions are dialing down the thermostat, putting off crucial training to save on current expenses, and generally do more with less,” Adams said. “The agency requires credit union cost controls and yet spends money well above market metrics on its own salaries and wages.”
It’s possible President Barack Obama’s recent announcement freezing wages for federal civilian employees could make the NCUA pay increases a moot point. The NCUA has not issued a statement reacting to the president’s announcement, which still needs Congressional approval.
Adams said the administration’s decision to spend $1.7 million on the consumer education campaign was unnecessary considering all of the effort by state leagues and local credit unions to reassure the public of the safety of their money in credit unions.
“This spend by the agency was unneeded and again reflects a terrible lack of accountability to anyone,” Adams said.
Adams questioned the board’s plan for the Corporate Stabilization assessments. He suggested that the NCUA should follow the FDIC’s lead in allowing the stabilization fund to dip below optimum levels while the economy recovers so credit unions have the funds to cover the assessments.
“Where is the intended relief for credit unions’ bottom lines?” Adams asked. “Certainly, this is inconsistent with the approach used by the FDIC where it has let its reserve level fall in order to allow insured institutions to regain health and avoid as many failures as possible by spreading out the costs.”
Adams said natural person credit unions are dealing with increased regulations, greater compliance costs and fewer revenue opportunities while the economy struggles to regain momentum.
“I strongly urge you (Matz) and the NCUA board to seek moderation in its approach to managing its own budget and in the way that assessments are front-loaded on the credit union industry versus spreading them out over a longer period of time,” Adams said.