Efficiency was the word of the day Friday, as both the Credit Union National Association and the National Association of Federally-Insured Credit Unions released the respective letters the two trade groups filed with the National Credit Union Administration regarding the regulator’s proposed budgets for 2018 and 2019.
There was much common ground in the two letters, including the trades thanking NCUA for its transparency in releasing the budget documents and soliciting comments. Though they asked in slightly different ways, both CUNA and NAFCU expressed hope the regulator will continue to cut back on staff and start reducing its budget in the future.
Jim Nussle, president and CEO of CUNA, said the trade group performed an analysis comparing changes in NCUA’s budget to the changes in the banking industry’s comparable spending. Nussle said this study revealed NCUA’s budget remains approximately 95 percent higher than pre-recession levels, whereas banking industry outlays are up 75 percent over that period.
“Although we may conclude NCUA’s total outlays are elevated from a comparative historical perspective, it is obvious – both in the budget justification’s numbers and its accompanying narrative – that NCUA is attempting to increase efficiency while improving operations and interactions with credit unions. We fully expect the current proposed investments in capital, systems, and technology to lead to future improvements in efficiency, lower staffing levels, and additional relief for thousands of credit unions under NCUA supervision,” Nussle wrote.
Nussle said NCUA’s cost per full-time employee “continues to increase substantially faster than inflation and marginally faster than the increases for credit union employees.” According to Nussle, “This discrepancy isn’t large over a one-year period, but if maintained over time, the cumulative effect will produce significant differences in pay between the regulator and the regulated.”
NAFCU poses three questions
Alexander Monterrubio, NAFCU’s director of regulatory affairs, began his letter by noting the budget, if approved, would mark the smallest year-over-year budget growth in more than a decade and at a significantly slower growth rate from the high of 13 percent in 2010.
However, Monterrubio quickly added, “NAFCU believes there must be a continued agency-wide commitment to increasing efficiency, eliminating redundancy and creating a sustainable budget that does not rely on annual increases.”
Monterrubio and NAFCU asked the NCUA board to address three questions when it votes on the proposed 2018 and 2019 budgets:
1. The proposed 2019 budget represents a 70 percent increase in the agency's expenditures since 2009, when the economic recovery began after the global financial crisis. In what environment, economic or otherwise, would NCUA envision its budget seeing a true reduction?
2. The past decade has also been characterized by a reduction of credit unions by 25 percent, how can the agency reduce its staff in a manner that reflects the consolidating industry?
3. When will the industry begin to see the cost-savings and economies of scale that are being promised in the budget?
According to Monterrubio, the “benefits” of the 18-month exam cycle announced last year for some credit unions “are already evidenced in the budget” as cuts in agency staff. He then asserted NCUA should take this process “one step further” and publicly evaluate the cost savings of extending an 18-month exam cycle to all well-run, low-risk credit unions with more than $1 billion in assets.
“Such an evaluation could materially decrease the agency’s operating budget,” Monterrubio wrote.
More assistance for smaller CUs
CUNA’s Nussle noted the budget proposal creates an office focused on chartering and credit union expansion, and it eliminates Economic Development Specialist consulting. Nussle said many of the nation’s small credit unions have benefited from the Office of Small Credit Union Initiatives and from the EDS program, and added NCUA’s internal research found EDS consulting was one of the “most impactful activities” in the OSCUI office and that those impacts were most obvious among the smallest credit unions – many of which are institutions in the greatest need of such services.
“There is little discussion on the details of the significant changes being proposed,” Nussle wrote. “CUNA urges the NCUA to carefully consider the approach taken on this front. While the focus on cost savings is laudable, it is clear a significant number of smaller institutions remain stressed in the current low-rate, hyper-competitive environment, and access to OSCUI resources can be a game-changer and a critical resource for the survival of many credit unions.”
Similarly, NAFCU’s Monterrubio wrote, “We ask that the new office taking the lead role formerly filled by the Office of Small Credit Union Initiatives (OSCUI) continue helping small credit unions thrive. Further, we recommend that the agency collaborate with external industry stakeholders, including NAFCU and others, to aid in those efforts.”