NCUA Proposes 3.6% Boost in Operating Expenses in 2022

The National Credit Union Administration on Wednesday proposed a $326.6 million operating budget for 2022, a 3.6% increase from the 2021 budget.

The draft budget includes plans to expand the number of credit unions that will receive annual exams as a result of the economic strains caused by the pandemic. That proposal will necessitate the hiring of an additional 29 examiners, the agency said.

The NCUA will hold a public hearing on the budget on Dec. 8. The budget remains a draft until it is adopted by the agency board.

The budget also reflects NCUA Chairman Todd Harper’s intention to place a higher priority on consumer protection. The document calls for five new employees in the agency’s Office of Consumer and Financial Protection to “increase the number of fair lending examinations and reviews and to strengthen the agency’s efforts to promote financial inclusion and outreach.” The draft budget also proposes to increase fair lending examinations by 50%–from 30 to 45 in 2022.

Harper may face opposition from Republican board members Kyle Hauptman and Rodney Hood, who have questioned the need to beef up agency consumer protection efforts.

Overall, the budget calls for an additional 48 new positions in the agency.

The draft budget estimates that the total 2022 budget will reach $345.3 million, a 1.2% increase from 2021. The proposed capital budget is $13.3 million, 30.7% lower than in 2021. The agency said that the capital budget decrease is possible because of the completion of the latest phase of the agency’s new examination tool.

In describing the need to increase the number of credit unions receiving annual exams,  the agency said that due to the pandemic, future economic conditions may change rapidly and may hit communities of modest means the hardest. As a result, the agency is proposing to expand the criteria for credit unions receiving annual exams to include those having assets between $500 million and $1 billion that have otherwise previously qualified for an extended examination cycle based on the current Exam Flexibility Initiative criteria, and those with assets of more than $250 million that are considered to face a higher risk of business or economic challenges.

The budget previews a new agency plan to help support credit unions with less than $100 million in assets. “Such support includes efforts to better tailor regulations and supervision to the needs of small credit unions, staff training about the unique needs of small credit unions and their role serving underserved communities, expanding opportunities for small credit unions to receive support through NCUA grants, training, and other initiatives, and fostering partnerships with external organizations that can support small credit unions,” the budget document states.

The budget also discusses the risks posed by climate change—an issue that may divide the agency board. Sources have said that the agency was unable to release its Strategic Plan in July, as scheduled, because board members could not agree on a statement on climate change.

Harper, a Democrat, has been outspoken about the need for the NCUA to address how climate change may affect the safety and soundness of individual credit unions and the system as a whole.

“Measuring, monitoring, and mitigating climate-related financial risks presents a number of complex conceptual and practical challenges not only for credit unions but also for the NCUA,” the budget document states. “The NCUA board will determine the appropriateness of adapting its risk monitoring framework to account for climate-related threats to financial stability, the credit union system, and the Share Insurance Fund.”

The budget also calls for an $8.6 million increase in the travel budget for 2022. The budget states that the agency expects that onsite examinations and related travel will resume in the Spring of 2022.

Reaction to the budget was swift.

B. Dan Berger, president/CEO of the National Association of Federally Insured Credit Unions, called on the agency to reassess its proposed spending increases. Berger questioned whether agency travel needs will revert to pre-pandemic levels.

“Bearing in mind all the hardships credit unions and their members have faced in the aftermath of the COVID-19 crisis, we urge the NCUA to reassess its budget proposal immediately to identify cost-savings opportunities and eliminate unnecessary areas of spending,” Berger said. “NAFCU is committed to working with the NCUA and will continue to provide feedback throughout this budget process to ensure the finalized budget properly reflects the agency’s commitment to the credit union industry.”

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