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Board Action Bulletin

ALEXANDRIA, Va. (Nov. 15, 2018) – The National Credit Union Administration Board held its tenth open meeting of 2018 at the agency’s headquarters today and unanimously approved two items:

• Operating, capital, and Share Insurance Fund budgets for 2019 and 2020 to fund the agency’s essential activities and strategic priorities.
• A proposed rule to update fidelity bond requirements for corporate and natural-person credit unions, as part of the agency’s regulatory reform agenda.

The Chief Financial Officer briefed the Board on the third-quarter performance of the National Credit Union Share Insurance Fund.

Agency Budgets Set for 2019, 2020

Board members approved the budgets for 2019 and 2020. The combined operating, capital, and Share Insurance Fund administrative budgets for 2019 will be $334.8 million, a 1.1 percent increase from the 2019 funding levels approved by the Board at its November 2017 meeting. The combined budgets for 2020 will be $343.9 million, a 2.7 percent increase from 2019.

Operating budgets for both years assume 1,178 full-time equivalent positions.

Operating Budgets

Budget Component	2019	2020
Operating budget	$304.4 million	$316.2 million
Capital budget	$22 million	$18.6 million
Share Insurance Fund budget	$8.4 million	$9.1 million
Full-time equivalents	1,178	1,178

The NCUA Board adopted the budget plan after providing credit union stakeholders with a detailed description of the proposed budgets at its October 17 public briefing and considering their comments.

Overhead Transfer Rate Set at 60.5 Percent; Operating Fee Rises 2.0 Percent

The 2019 overhead transfer rate will be 60.5 percent, and the operating fee will increase by an average of 2.0 percent for natural-person credit unions with assets of more than $1 million.

Detailed information on the overhead transfer rate and operating fee is available in the 2019-2020 Budget Justification (opens new window).

Federal credit unions will fund 70.5 percent of the NCUA’s 2019 operating budget, and federally insured, state-chartered credit unions will fund 29.5 percent.

The NCUA will charge the fee in March 2019, and payments will be due April 17, 2019.

The NCUA uses the operating fee to pay the agency’s costs of regulating federal credit unions. The overhead transfer rate is a transfer from the Share Insurance Fund to cover insurance-related expenses paid by both federal credit unions and federally insured, state-chartered credit unions.

Share Insurance Fund Posts Net Income of $93.5 Million

The National Credit Union Share Insurance Fund (opens new window) posted net income of $93.5 million in the third quarter of 2018, primarily due to the decrease in the provision for insurance losses.

Third-quarter total income was $76.5 million. Operating expenses were $51.1 million. The provision for insurance losses decreased overall by $70.9 million. The fund’s net position was $15.5 billion at the end of the third quarter.

As of June 30, 2018, the Share Insurance Fund’s calculated equity ratio was 1.35 percent, based on insured shares of $1.1 trillion.

As of the end of the third quarter, six federally insured credit unions had failed, and Share Insurance Fund losses were $744.9 million. Fraud was a contributing factor in one credit union failure in the third quarter.

For the third quarter of 2018:

• The number of CAMEL codes 4 and 5 credit unions declined 3.3 percent from the second quarter of 2018 to 203 from 210. Assets for these credit unions declined 10.9 percent from the second quarter of 2018, to $11.5 billion from $12.9 billion.
• The number of CAMEL code 3 credit unions declined 3.0 percent from the second quarter of 2018 to 1,001 from 1,032. Assets for these credit unions declined 5.7 percent from the second quarter of 2018, to $55.9 billion from $59.3 billion.

The third-quarter figures are preliminary and unaudited.

Proposed Rule Updates Fidelity Bond Requirements

The Board approved proposed amendments to fidelity bond requirements (opens new window) to ensure safe and sound credit union operations and protect the National Credit Union Share Insurance Fund.

The proposed rule would:

• Strengthen oversight of fidelity bond coverage by a credit union’s board of directors;
• Ensure there is adequate time to discover and file claims following a credit union’s liquidation;
• Formalize the Office of General Counsel’s September 2017 legal opinion (opens new window) permitting a natural-person credit union to extend bond coverage to certain credit union service organizations; and
• Clarify the documents subject to the NCUA Board’s approval and require all bond forms receive approval every 10 years.

The changes are part of the agency’s regulatory reform agenda.

Comment on the proposed rule must be received within 60 days of publication in the Federal Register.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.