NCUA Chairman Todd M. Harper during the public briefing on the NCUA's proposed budget.
As Prepared for Delivery on November 16, 2023
As mandated by Congress, the NCUA Board is holding this briefing on the staff draft agency budget for 2024 and 2025. Today’s briefing is a dialogue for the NCUA Board to receive stakeholder feedback and for stakeholders to learn more about and better understand the NCUA staff draft budget recommendations. As in the past, we anticipate a collegial exchange from all parties about the issues at hand.
Additionally, as I’ve noted at previous budget briefings, the NCUA staff draft budget is only a starting point for discussion. It is not a final product. That’s why the NCUA Board is interested in receiving stakeholder input both at today’s briefing and through the comment process. As a reminder, written comments on the staff draft budget are due by Tuesday, November 21. All stakeholders are encouraged to weigh in, even those who are not presenting today.
The proposed combined 2024 NCUA staff draft budget is $394.5 million or 9.5 percent higher than the 2023 budget. That figure has attracted considerable press attention in recent weeks. But, what gets lost by many in coverage of these deliberations is the staff draft budget is actually $8.7 million or 2.1 percent lower than the 2024 budget previously approved by the Board in December 2022. If the NCUA Board did nothing, the total 2024 NCUA budget would be $403.2 million, an increase of 11.9 percent. To reach this lower projected 2024 budget number, agency staff have carefully reviewed office requests, identified appropriate cost savings, and adjusted priorities.
One such priority for me is ensuring that the NCUA adopts consumer compliance examination and supervisory practices more in line with the other federal banking agencies. In fact, when creating the Federal Financial Institutions Examination Council, Congress sought to increase the uniformity of examination and supervisory practices across regulators. While the federal banking agencies have long conducted separate consumer compliance exams and assigned a separate consumer compliance score outside of the CAMELS process, the NCUA has not.
We need to change that practice, so the proposed 2024 budget includes funding to establish 13 regional consumer compliance specialist positions, which will bolster the agency’s efforts to ensure compliance with consumer financial protection and fair lending laws and regulations. That change is good for credit union members. And, that change is good for those credit unions that will receive regular and more comprehensive feedback about the effectiveness of their consumer compliance efforts.
Before today’s budget briefing, several parties have also publicly said the NCUA needs to provide more justification for its increased focus on consumer financial protection or that these efforts are coming at the expense of safety and soundness. Let me be clear: Safety and soundness and consumer compliance do not compete with one another. It is not a zero-sum game where gains by one focus area mean instant and commensurate losses for the other.
The NCUA is statutorily required to ensure both the safety and soundness of the credit union system, regardless of the asset size of a federally insured credit union and enforce compliance with consumer financial protection laws and regulations for those credit unions below $10 billion in assets. In prior years, the NCUA has invested fewer resources into consumer compliance examinations than safety and soundness examinations. The proposed 2024 budget brings the NCUA’s focus and resources more into balance so the agency can meet its congressional mandates for both missions.
Further, the staff draft budget brings 17 existing overhire positions onto the NCUA’s budget for 2024. By bringing these overhire positions onto the NCUA budget, we are being more transparent about the agency’s actual staffing levels. And, even with these additions, the NCUA’s proposed authorized staffing level of 1,248 full-time equivalent employees in 2024 remains below the agency’s highest staffing level in 2015.
Like the credit union members and credit unions the agency protects and insures, the NCUA is experiencing inflationary pressures for nearly everything it purchases, including staff pay and benefits, expert contractor support, supplies, travel, and rent. Additionally, the NCUA must comply with new congressional mandates, some portions of executive orders, and certain directives from the Office of Personnel Management and the Office of Management and Budget on a range of issues, including cybersecurity preparedness, website operations, and retirement and benefit contributions. Each of these new directives must be adequately resourced.
As stewards of the agency’s resources, the NCUA Board evaluates what is needed to support credit unions’ safety and soundness, ensure consumer compliance, and maintain the health of the National Credit Union Share Insurance Fund. There are several challenges confronting the credit union system for which the Board must prepare.
For example, as we learned during the Share Insurance Fund’s quarterly performance report earlier today, total assets in large, complex credit unions with composite CAMELS code 3 ratings increased to $131.7 billion in the third quarter. That’s nearly 45 percent higher than the previous quarter’s results. And, we can expect those numbers to rise. That’s because NCUA examiners are seeing growing signs of interest rate risk, liquidity risk, and credit risk across the system.
And, since NCUA’s return to on-site examinations and supervision, field staff have found an increase in recordkeeping deficiencies, problems with internal controls, and instances of fraud. The rising risks within the credit union system also demonstrate why the NCUA Board must ensure the agency’s 2024 budget has sufficient resources to examine, supervise, and mitigate these growing risks, protect credit union members, and safeguard the Share Insurance Fund from losses. Those efforts require investment.
So, I look forward to hearing today’s presentations on the staff draft budgets for 2024 and 2025. I would also like to thank my fellow Board members — Vice Chairman Hauptman and Board Member Hood — for their willingness to already begin engaging with me on their budget priorities. I look forward to working with them to reach a consensus on the agency’s budget. With stakeholder feedback, prudent decisions, and consideration of our statutory responsibilities, I am confident that we can reach an agreement in the coming weeks.
That concludes my opening remarks. I now recognize Vice Chairman Hauptman.