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NAFCU’s Letter Regarding the NCUA’s 2013 Mid-Year Budget Review

July 22, 2013

The Honorable Debbie Matz

Chairman

National Credit Union Administration

1775 Duke Street

Alexandria, VA 22314

RE: NCUA 2013 Mid-Year Budget Review

Dear Chairman Matz:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents federal credit unions, I am writing to you regarding the National Credit Union Administration’s (NCUA) 2013 mid-year budget review as well as estimated assessments for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF).

As the NCUA conducts its mid-year budget review in anticipation of the July 25, 2013 Board meeting, NAFCU strongly urges the NCUA Board to look at each item of the budget with the explicit goal of achieving cost-savings. It is incumbent on the NCUA, as the steward of the money it receives from federally-insured credit unions and their members, that each penny it collects is administered in the utmost diligence and respect to credit unions that pay for the operating expenses and administration of the agency.

NAFCU remains concerned regarding NCUA’s overall increases in its operating budget for 2013 following significant increases in 2012. Those increases represented a $14.5 million or 6.1% increase over the prior year and an increase of more than 58% over the past 5 years.

In addition, NAFCU maintains that the NCUA increase in pay, as reflected in the agency’s 2013 budget, is problematic. While other agencies such as the Federal Deposit Insurance Corporation decreased this aspect of their budget and others have been forced to either lay off employees or reduce staff, the NCUA increased its pay and benefits more than $12.8 million from 2012.

The dramatic increase in the agency’s budget over the past 5 years is simply not sustainable. We believe the mid-year review offers the agency a great opportunity to buck the trend by cutting costs.

Further, the agency’s existing estimates for assessments for the TCCUSF provides for an assessment range between 8 to 11 basis points. There are a number of reasons to suggest that assessments at the lower end of the range, if not even lower, would be appropriate. The economy overall is improving and the housing market has rebounded as well. As the agency has emphasized in recent months, the state of the industry has improved steadily over the past year and fewer credit unions pose safety and soundness concerns. In the 1st quarter, CAMEL code 4 and 5 credit unions dropped 8.1% and at the end of March 2013, credit unions with CAMEL codes 3, 4 and 5 held only 12.6% of the industry’s assets, down from 21.9% at year-end in 2010. The 15 remaining corporate credit unions are all likely to meet the next set of application capital requirements in October, 2013, and are experiencing improved financial health. Thus, NAFCU calls on the agency to ensure that assessments for the Fund as low as possible, even below the lower end of the estimated range, if appropriate.

Finally, NAFCU reiterates our previously-expressed concerns about the lack of transparency and opportunity for the public to be heard in the process for establishing the NCUA’s annual budget. We strongly believe that the credit union industry, from which the agency receives it total funding, must have the opportunity to review and comment on the agency’s budget before the budget is adopted.

I look forward to hearing from you regarding this important matter. Should you have any questions or would like to discuss these issues further, please feel free to contact Regulatory Affairs Counsel, PJ Hoffman at (703) 842-2212 or by email at pjhoffman@nafcu.org.

Sincerely,

Fred R. Becker, Jr.

President/CEO

Cc:       Board Member Michael E. Fryzel