NCUA Slashes $6.7 Million From 2023 Budget

Agency approves trimmed budget for upcoming year following criticism from credit union groups.

Having been attacked by trade groups for proposed budget increases, the NCUA board on Thursday approved a spending plan that slashes $6.7 million from the document presented earlier this year.

The finalized budget also cuts seven new positions that were in the draft proposal presented by officials.

Earlier this year, the NCUA had proposed an operating budget of $350 million for 2023—a 9.6% increase over this year’s budget. The agency also wanted to add 25 new positions to its staff.

The board additionally approved reducing the operating fee collected by federal credit unions by $15 million next year—a reduction of about 1.8% from the current level.

New Positions Added, Others Eliminated

In the approved budget, the NCUA board further agreed to: 

–Add two new positions to the Office of the Executive Director to support the agency’s Financial Technology and Access team. “These new staff will work with credit unions to harness the opportunities that innovation provides to support financial inclusion efforts and make financial services more accessible to underserved communities,” NCUA staff wrote, in a memo to the board.

–Defer three specialist examiner positions until 2024.

–Eliminate six new positions from various offices.

–Reduce the agency’s travel budget by $1 million, bringing it to 70% of pre-pandemic levels.

–Defer contract support for the agency’s virtual examination project, at a savings of $500,000.

Reaction From Board Members 

NCUA Chairman Todd Harper said the budget represents compromises made by the three board members.

He added that he is pleased that the plan includes two new fair lending specialists—an area he has identified as a priority for the agency. “Ensuring that credit unions are providing their members with safe, fair, and affordable financial products and services—free of discrimination—will lead to more wealth-building in the communities that need it the most,” the chairman said.

Board Vice Chairman Kyle Hauptman criticized government spending in general and appeared to take a shot at agency employees.

“Prosperity is wonderful, and I wish everyone had it,” he said. “I will say that during the pandemic, when [we were] doing virtual meetings, I was struck how many NCUA employees were at their second home. And that’s great for them; in this country, we celebrate success and abundance. But I think we all understand why the general public looks at DC with something approaching disdain.”

Hauptman added that agency budgets are written by people who receive the money, not those paying the money.

Normal Operating Level Unchanged

The board did not modify the agency’s Normal Operating Level, which will stand at 1.33%.

“Given the level of economic uncertainty in the year ahead and the growing stresses we see within the credit union system, the staff’s recommendation to maintain the normal operating level at 1.33 percent in 2023 is sound,” Harper said.

Credit union trade groups have called for a Normal Operating Level of 1.30%.

Board member Rodney Hood said that a case could be made for the reduction, but that given economic uncertainty, he would accept 1.33%.

Fintech Rule Approved

The board additionally approved a proposed rule intended to make it easier for credit unions to take advantage of fintech opportunities.

“By removing certain prescriptive limits and other qualifying conditions, and replacing them with risk-focused, principles-based requirements, the Board believes this proposal will advance the agency’s efforts to strike an appropriate balance between mitigating risk to the National Credit Union Share Insurance Fund, protecting credit union members and fostering growth and stability in the credit union system,” agency staff said, in a memo.

The plan also is designed to increase the ability of federally insured credit unions to engage in lending arrangements with third parties, including fintechs.

Harper said that both credit unions and fintech companies have expressed confusion about how to interpret the agency’s 2013 loan participation final rule.

Hauptman added that the proposed rule would provide credit unions with the flexibility to engage in lending activities related to fintechs.

Climate Issues Unresolved

In a written statement, Hood acknowledged that the board had not met its goal of releasing by the end of the year a request for information about the risks that “extreme weather events” may pose for the credit union industry.

That issue has proven to be particularly controversial, with Republican members of Congress saying that the agency could hurt farm-state credit unions if climate-related rules were issued.

As a result, in its annual performance report, the board had agreed to request public comment on the issue.

Hood said he will work with Harper to release a request for information about “extreme weather events” as soon as possible.

Separately, Hood added that he believes the NCUA board, as currently constituted, “may be the most well-functioning NCUA board in quite some time.”