ALEXANDRIA, Va.-The NCUA Board last week approved a 12% increase in spending for next year, with most of the increased costs dedicated to additional examiner hires to cope with growing losses among CUs.
NCUA also estimated growing losses among corporate and natural person CUs are likely to require credit unions to pay dual assessments of about 25 basis points, or as much as $2 billion next year, about the same as this year. The agency said the dual costs of the corporate bailout and National CU Share Insurance Fund premium are projected to be between 20 bps and 35 bps, with a mid-range of the 26 bps credit unions paid this year.
NCUA Chairman Debbie Matz emphasized that the projections are just estimates and are being provided to credit unions for planning and budgeting purposes. "This is a fairly narrow range that will be useful for credit unions," she said. She noted that final figures will depend on the rate of failures that come to fruition and how the resolution of the corporate bailout proceeds.
The spending increase will fund:
• the hiring of 75 new examiners;
• average pay raises of 5% for NCUA's 1,200 personnel, with some getting 8%;
• $650,000 to contract for additional material loss reviews for big CU failures;
• $1.1 million to create a new Office of Minority and Women Inclusion; and
• the addition of two new economists.
The budget for next year is $225.4 million, up $24.5 million from this year's. The big increase in examiners comes in response to growing losses and failures among natural person credit unions. NCUA has projected losses of $1.2 billion, with some major potential losses among a handful of big CUs.
Corporate Rule Amendments
NCUA also issued for comment proposed amendments to its new corporate rule that would require corporate boards and management to attest to the accuracy of their financial reporting-similar to requirements under the Sarbanes-Oxley Act, and record all board votes. The proposals, issued for a 30-day comment period, will also limit credit unions to membership in a single corporate and allow corporates to raise new funds by charging membership fees and assessing privately insured credit union members a portion of NCUA's corporate bailout assessments.
Board member Gigi Hyland said she is interested in reading comments on the proposal on how CU executives feel about sharing the costs of the corporate bailout with privately insured CUs, especially from those credit unions that are not part of the corporate system but are still paying the bailout charges.