[Federal Register Volume 81, Number 17 (Wednesday, January 27, 2016)]
[Notices]
[Pages 4804-4835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01626]
[[Page 4803]]
Vol. 81
Wednesday,
No. 17
January 27, 2016
Part III
National Credit Union Administration
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Request for Comment Regarding Overhead Transfer Rate Methodology;
Notices
Federal Register / Vol. 81 , No. 17 / Wednesday, January 27, 2016 /
Notices
[[Page 4804]]
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NATIONAL CREDIT UNION ADMINISTRATION
Request for Comment Regarding Overhead Transfer Rate Methodology
AGENCY: National Credit Union Administration (NCUA).
ACTION: Request for comment.
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SUMMARY: The NCUA Operating Budget has two primary funding mechanisms:
(1) An Overhead Transfer, which is funded by federal credit unions
(FCUs) and federally insured state-chartered credit unions (FISCUs);
and (2) annual Operating Fees, which are charged only to FCUs. In a
voluntary effort to invite input from stakeholders representing federal
and state-chartered credit unions, the NCUA Board (Board) is
simultaneously requesting comments on the methodologies for both
funding mechanisms in separate notices in the Federal Register.
This request for comments focuses on the methodology NCUA uses to
determine the Overhead Transfer Rate (OTR). To facilitate comments, the
Board is also assembling and describing its existing OTR methodologies
and processes, which are also available on NCUA's Web site. The Board
applies the OTR to NCUA's Operating Budget to determine the portion of
the budget that will be funded from the National Credit Union Share
Insurance Fund (NCUSIF). The Board invites comments on all aspects of
the OTR methodology and any alternatives commenters may offer. Areas
the Board specifically seeks comments on include:
Whether the OTR should continue to be determined using a
formula-driven approach, or instead be set largely at the discretion of
the Board;
The definition NCUA uses for insurance-related activities;
Adjustments or changes to the current calculation; and
Alternate methodologies to arrive at an accurate and fair
allocation of costs.
To be most instructive to the Board, commenters are encouraged to
provide the specific basis for their comments and recommendations, as
well as documentation to support their proposed adjustments or
alternatives.
DATES: Comments must be received on or before April 26, 2016 to be
assured of consideration.
ADDRESSES: You may submit comments by any of the following methods
(Please send comments by one method only):
NCUA Web Site: https://www.ncua.gov/about/pages/board-comments.aspx. Follow the instructions for submitting comments.
Email: Address to [email protected]. Include ``[Your
name]--Comments on OTR Methodology'' in the email subject line.
Fax: (703) 518-6319. Include your name and the following
subject line: ``Comments on OTR Methodology.''
Mail: Address to Gerard Poliquin, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
Public Inspection: You can view all public comments on NCUA's Web
site at https://www.ncua.gov/about/pages/board-comments.aspx as
submitted, except for those we cannot post for technical reasons. NCUA
will not edit or remove any identifying or contact information from the
public comments submitted. You may inspect paper copies of comments at
NCUA's headquarters at 1775 Duke Street, Alexandria, Virginia 22314, by
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment,
call (703) 518-6360 or send an e-mail to [email protected].
FOR FURTHER INFORMATION CONTACT: Russell Moore, Loss/Risk Analysis
Officer, Office of Examination and Insurance, National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428 or
telephone: (703) 518-6383.
Authority: 12 U.S.C. 1783(a); 1766(j)(3).
SUPPLEMENTARY INFORMATION: NCUA charters, regulates and insures
deposits in federal credit unions (FCUs) and insures deposits in state-
chartered credit unions that have their shares insured through the
NCUSIF. To cover expenses related to its statutory mission, the Board
adopts an Operating Budget in the fall of each year. The Federal Credit
Union Act (FCU Act) authorizes two primary sources to fund the
Operating Budget: (1) Requisitions from the NCUSIF ``for such
administrative and other expenses incurred in carrying out the purposes
of [Title II of the FCU Act] as [the Board] may determine to be
proper''; \1\ and (2) ``fees and assessments (including income earned
on insurance deposits) levied on insured credit unions under [the FCU
Act].'' \2\ Among the fees levied under the FCU Act are annual
Operating Fees, which are required for FCUs under 12 U.S.C. 1755 ``and
may be expended by the Board to defray the expenses incurred in
carrying out the provisions of [the FCU Act,] including the examination
and supervision of [FCUs].'' Taken together, these dual funding
authorities effectively require the Board to determine which expenses
are appropriately paid from each source, though these two provisions
give the Board broad discretion in this.
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\1\ 12 U.S.C. 1783(a).
\2\ 12 U.S.C. 1766(j)(3). Other sources of income for the
Operating Budget include interest income, funds from publication
sales, parking fee income, and rental income.
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To determine an appropriate division of expenses between these two
funding sources, the Board uses the OTR methodology described in this
publication. This version of the OTR methodology was first adopted by
the Board in 2003 and refined in 2013. The OTR represents the
allocation formula the Board uses to determine which expenses are
properly characterized as insurance related and charged to the NCUSIF
under Title II, rather than collected through annual Operating Fees.\3\
Only two statutory provisions limit the Board's discretion with respect
to NCUSIF requisitions for NCUA's Operating Budget and, hence, the OTR.
First, expenses funded from the NCUSIF must carry out the purposes of
Title II of the FCU Act, which relate to share insurance.\4\ Second,
NCUA must fund at least some part of its Operating Budget through fees
charged pursuant to 12 U.S.C. 1766(j)(3).\5\ NCUA has not imposed any
additional policy or regulatory limitations on its discretion for
determining the OTR.
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\3\ Annual Operating Fees must ``be determined according to a
schedule, or schedules, or other method determined by the NCUA Board
to be appropriate, which gives due consideration to the expenses of
the [NCUA] in carrying out its responsibilities under the [FCU Act]
and to the ability of [FCUs] to pay the fee.'' 1755(b). The NCUA
Board's methodology for determining the aggregate amount of
Operating Fees is discussed in a separate Federal Register
publication.
\4\ 12 U.S.C. 1783(a).
\5\ Accord 12 U.S.C. 1755(a) (``In accordance with rules
prescribed by the Board, each [FCU] shall pay to the [NCUA] an
annual operating fee which may be composed of one or more charges
identified as to the function or functions for which assessed.'').
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Third, while not a legal requirement, the current Board policy is
to use a cost-accounting methodology that by design is both neutral and
equitable with respect to credit union charter types.
The methodology satisfies the two legal requirements identified
above. First, the funds transferred from the NCUSIF must relate to
NCUA's insurance functions. The Board notes the breadth of that
category, and each expense funded from the OTR in accordance with the
formula explained herein, reasonably relates to insurance for purposes
of 12 U.S.C. 1783(a). NCUA's definition of ``insurance related
examination procedures'' that fall under Title II includes
``examination or supervision contact procedures [that]
[[Page 4805]]
address safety and soundness issues.'' Safety and soundness terminology
is sprinkled throughout Title II of the FCU Act with respect to NCUA's
insurance-related responsibilities.\6\ As such, this definition is
contained within the broad swath of 12 U.S.C. 1783(a), which simply
requires that an expense be ``incurred in carrying out the purposes of
[Title II]'' on share insurance to be eligible for OTR coverage.
Similarly, ``insurance regulatory related examination procedures'' are
defined in the OTR methodology as those that assess compliance with
regulations that ``address safety and soundness issues.'' This
secondary definition expressly excludes procedures that assess
compliance with regulations ``designed to protect consumers directly.''
Therefore, this supplemental definition narrows, rather than expands,
the procedures that the OTR methodology includes under Title II, since
some consumer protection regulations may also be directed at safety and
soundness. Further, neither the activities the OTR methodology
identifies as examples of examination or supervision procedures that
address safety and soundness, nor any of the NCUA-specific regulations
classified as ``insurance regulatory'' related in the regulation
mapping in Appendix A, fall outside of this definition.
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\6\ See, e.g., 12 U.S.C. 1781(c)(2) (referencing ``unsafe and
unsound'' financial condition and policies in connection with
applications for insurance); 1782(a)(6)(b) (referencing the phrase
``unsafe and unsound'' in connection with a failure to obtain an
outside, independent audit); 1786 (addressing ``unsafe or unsound
practices'' or ``safety and soundness'' in connection with
termination of insurance, orders to cease and desist, prohibition
and removal orders, civil money penalties, and delay in publication
of final orders); 1787(b)(2)(D) (authorizing the Board to take
actions as conservator to put an insured credit union ``in a sound
and solvent condition''); 1790d(h)(1) (referencing ``safety and
soundness'' in relation to prompt corrective action and
reclassification of a credit union's net worth category).
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Second, at least some part of the Operating Budget comes from fees
charged to insured credit unions under 12 U.S.C. 1755. The imposition
of the annual Operating Fees on FCUs and their use to pay expenses in
the Operating Budget is sufficient evidence of the proper exercise of
the Board's discretion under these two limitations. Within these broad
statutory bounds, the Board is seeking additional public input on its
OTR methodology through Federal Register processes.
Since its inception, NCUA has taken the position that the OTR is
not a legislative rule under the Administrative Procedure Act (APA) and
is, therefore, exempt from notice and comment rulemaking processes.\7\
As such, NCUA has never used notice and comment rulemaking to establish
either an individual determination of the OTR or the general
methodology used to calculate the OTR. However, the OTR has been
explained, discussed, and reviewed in various public records, including
in annual Board Action Memorandums related to budget matters,
independent evaluations, and other documents available in public
records and on NCUA's Web site.\8\ Beyond its APA obligations, the
Board has chosen to solicit public comments on the OTR processes and
methodologies through this Federal Register publication.
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\7\ NCUA's legal analysis with respect to the OTR and APA
process is available at the following Web page: https://www.ncua.gov/Legal/Documents/Opinion/OL2015-0818.pdf. Note that even
where not subject to notice and comment procedures, the APA provides
that ``[a]gency action made reviewable by statute and final agency
action for which there is no other adequate remedy in a court are
subject to judicial review.'' 5 U.S.C. 704. The scope of such a
review is set forth in 5 U.S.C. 706.
\8\ Materials related to the OTR can be found at the following
NCUA Web page: https://www.ncua.gov/About/Pages/budget-strategic-planning/supplementary-materials.aspx.
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Table of Contents
I. Overview
II. Context For OTR
III. History
IV. Detailed Discussion of OTR Methodology
a. Examination Time Survey
b. Workload Budget
c. Financial Budget
d. Calculation of Insurance and Non-Insurance Costs
e. Allocation of Insurance and Non-Insurance Costs
f. Calculating the OTR
g. State Supervisory Authority (SSA) Imputed Value
V. Request for Comment
VI. Appendix A--Mapping of Regulations
VII. Appendix B--Examination Time Survey Instructions
I. Overview
NCUA is the independent federal agency created by the U.S. Congress
to regulate, charter and supervise FCUs. With the backing of the full
faith and credit of the United States, NCUA also operates and manages
the NCUSIF. Congress enacted Title II of the FCU Act on October 19,
1970.\9\ Title II established the NCUSIF, requiring all federal credit
unions to immediately apply for insurance and permitting the Board to
insure accounts in state-chartered credit unions. After enactment of
Title II, the Board established an allocation formula, the Overhead
Transfer Rate, to determine the amount of the Operating Budget that it
would requisition from the NCUSIF for insurance-related expenses. Over
time, the Board has refined the OTR process to ensure the equitable
allocation of costs between NCUA's dual roles of insurer (insurance
related activities) and regulator that charters federal credit unions
(non-insurance related activities).
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\9\ Section 1783(a) of the FCU Act created the NCUSIF and
authorized the NCUA Board to use the fund to pay for ``such
administrative and other expenses incurred in carrying out the
purposes of [Title II] as it may determine to be proper''.
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NCUA's current methodology, in place since 2003 and refined in
2013, determines the OTR using the results of an examiner time survey
(ETS). The ETS captures the time NCUA spends examining and supervising
FCUs, carrying out its dual mission as insurer of federally insured
credit unions (FICUs), and the chartering authority for federal credit
unions. The OTR methodology also factors in the following:
The value to the NCUSIF of the insurance-related work
performed by state supervisory authorities (SSAs).
The cost of NCUA resources and programs with different
allocation factors from the examination and supervision program.
The distribution of insured shares between FCUs and
federally insured state-chartered credit unions (FISCUs).
Operational costs charged directly to the NCUSIF.
The goal of the methodology is to create a comprehensive and
equitable calculation and allocation of costs to set the OTR annually
within a framework that can be administered at minimal cost.
II. Context for the OTR
There is a distinct overlap between the historical role of a
regulator, concerned with enforcing laws and implementing public
policy, and that of an insurer. Though not motivated by the associated
financial liability that comes with the role of insurer, regulators
address threats to the viability of their financial institutions to
protect consumers and their jurisdiction's economy. This focus on
viability benefits the insurer. The primary roles of an insurer are to
protect depositors and the taxpayer, and contribute to the stability of
the financial system.
Before the advent of federal deposit insurance, federal financial
institution regulators were concerned with protecting the stability of
the financial system by ``regulating'' it. Thus, financial institution
examinations focused on ensuring (1) statutes and regulations were
followed to protect consumers, and (2) institutions were viable to
protect consumer deposits,
[[Page 4806]]
preserve access to financial services, and safeguard the stability of
the economy.\10\
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\10\ The Office of the Comptroller of the Currency (OCC)
charters, regulates, and supervises all national banks and federal
savings associations as well as federal branches and agencies of
foreign banks. On its Web site, the OCC lists its mission as
ensuring that national banks and federal savings associations
operate in a safe and sound manner, provide fair access to financial
services, treat customers fairly, and comply with applicable laws
and regulations. Similarly, the Board of Governors of the Federal
Reserve System has supervisory and regulatory authority over a wide
range of financial institutions, including state-chartered banks
that are members of the Federal Reserve System, bank holding
companies, thrift holding companies and foreign banking
organizations that have a branch, agency, a commercial lending
company subsidiary or a bank subsidiary in the United States. On its
Web site, The Federal Reserve states its mission is to provide the
nation with a safer, more flexible, and more stable monetary and
financial system. One of its four stated general duties is
supervising and regulating banking institutions to ensure the safety
and soundness of the nation's banking and financial system and to
protect the credit rights of consumers. On its Web site, the Federal
Deposit Insurance Corporation states its mission is to maintain
stability and public confidence in the nation's financial system by
insuring deposits, examining and supervising financial institutions
for safety and soundness and consumer protection, making large and
complex financial institutions resolvable, and managing
receiverships.
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NCUA has a unique dual role in that it serves as both the regulator
of FCUs and the insurer of FCUs and FISCUs. Given this dual role, it is
appropriate to allocate examination and supervision costs between the
NCUSIF and Operating Fees charged to FCUs. The policy rationale for
this allocation is supported by various provisions of the FCU Act.
In Title II of the FCU Act, Congress established the NCUSIF and
housed it within NCUA for administration by the NCUA Board.\11\
Congress envisioned efficiencies from this arrangement, as well as
NCUA's partnership with state regulators. Evidence of this intent to
streamline can be found in 12 U.S.C. 1782(a)(5), which requires reports
FCUs must file under Title I of the FCU Act to be prepared so ``that
they can be used for share insurance purposes.'' Similarly, this
provision requires NCUA to use the reports filed by FISCUs with their
state regulators ``for share insurance purposes . . . [t]o the maximum
extent feasible. . . .'' \12\
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\11\ 12 U.S.C. 1783.
\12\ 12 U.S.C. 1782(a)(5).
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Congress also recognized that, in addition to losses related to
credit union failures, the NCUSIF would incur expenses related to its
administration, including examination staff and other employees. Title
II empowers the NCUA Board to determine the proper allocation of
``administrative and other expenses incurred'' under Title II that may
be funded by direct requisitions from the NCUSIF.\13\ Title II further
subjects the resources expended for ``insurance purposes'' to the
Board's discretion by empowering the Board to ``appoint examiners who
shall have power, on its behalf, to examine any insured credit union,
any credit union making application for insurance of its member
accounts, or any closed insured credit union whenever in the judgment
of the Board an examination is necessary to determine the condition of
any such credit union. . . .'' \14\ Title I confirms this design by
requiring that salaries and expenses of the Board and NCUA employees
``be paid from fees and assessments (including income earned on
insurance deposits) levied on insured credit unions under [the FCU
Act].'' \15\ In addition to assessments charged to all insured credit
unions simply by nature of their NCUSIF insurance, Title I requires an
annual Operating Fee charged to FCUs in recognition of the additional
duties required of NCUA under Title I with respect to FCUs.\16\
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\13\ 12 U.S.C. 1783(a).
\14\ 12 U.S.C. 1784(a) (emphasis added).); see also 1789(a)(7).
\15\ Sec. 1766(j)(3) (emphasis added).
\16\ Sec. 1755.
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NCUA also has the authority to promulgate rules and regulations to
carry out the provisions of Title II.\17\ Accordingly, the NCUA Board
has approved rules and regulations that specifically address safety and
soundness and protect the NCUSIF.\18\
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\17\ Sec. 1789(a)
\18\ NCUA staff have mapped all examination related rules and
regulations to one of two categories: insurance regulatory related,
or non-insurance and consumer regulatory related. This regulatory
mapping provides the key basis for determining how examination time
is measured for purposes of the budgetary Overhead Transfer Rate.
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Under the discretion vested in it under the FCU Act, the NCUA
Board's primary motivation for the agency's regulations and examination
program has been managing risk to the NCUSIF posed by all insured
credit unions, whether state chartered or federal. The Board notes that
NCUA's role as insurer is best fulfilled by a proactive approach to
preventing losses, in addition to paying the post-failure obligations
that NCUSIF insurance coverage requires. Since the implementation of
federal share insurance in 1970, the NCUA Board has instituted a much
more proactive examination and supervision program geared toward safety
and soundness, which focuses on insurance related issues. In 2002, the
NCUA Board strengthened its commitment to fulfilling NCUA's role as
insurer by implementing the Risk-Focused Examination Program. This
program bases examination scope and timing to a large extent on the
risks an institution poses to the NCUSIF. The OTR's portion of NCUA's
Operating Budget, including its changes over time, reflects the Board's
fulfillment of its insurance responsibilities under the FCU Act under
evolving economic and legislative circumstances.
III. History
The NCUSIF was established in 1970 through an amendment to the FCU
Act. Section 203(a) of the FCU Act, 12 U.S.C. 1783(a), created the
NCUSIF and authorized the Board to use it to pay for ``such
administrative and other expenses incurred in carrying out the purposes
of [the FCU Act] as it may determine to be proper.''
In 1972, a Government Accountability Office (GAO) audit \19\
recommended NCUA adopt a method of allocating costs between NCUA and
the newly formed NCUSIF. Between 1973 and 1980, various cost allocation
methods were employed, including direct charges to the NCUSIF for
insurance expenses, including costs to close institutions, liquidation
and merger costs, and, examiner time spent supervising--as opposed to
examining--institutions. Starting in 1981, the OTR ranged between 30
and 34 percent, and stayed in that range through 1984.
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\19\ http://www.gao.gov/assets/210/203181.pdf.
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From 1985 through 1994, NCUA's Office of Examination and Insurance
(E&I) coordinated an annual ETS to determine an appropriate factor for
apportioning the agency's total operating expenses. Examiners completed
1,000 to 1,200 survey forms each year. The survey results supported a
transfer rate between 50.1 percent and 60.4 percent for insurance
related activities; however, the NCUA Board maintained the OTR at 50
percent.
In 1994, and again in 1997, the NCUA Board approved conducting
examiner time surveys once every three years. Three-year surveys
covered fiscal years 1995 through 1997 and fiscal years 1998 through
2000. During that period, the OTR remained at 50 percent through 2000.
The NCUA Board then voted to resume annual examiner time surveys in
2000 and expanded the survey to include more examiners, as well as
central and regional office staff. The fiscal year 2000 survey results
supported a transfer rate of 66.72 percent. After 15 years of holding
the transfer rate at 50 percent, the NCUA
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Board increased the transfer rate to 66.72 percent for fiscal year
2001.
The Board also decided to hire an independent party to assess the
OTR process. Deloitte & Touche's review of the OTR process was issued
on September 5, 2001 and included several recommendations to improve
the OTR process.\20\ These recommendations were implemented in 2002.
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\20\ The full independent report from Deloitte is available on
NCUA's Web site: https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/2001DeloitteReportonOTRProcess.pdf.
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In 2002, as a result of the Deloitte & Touche review, NCUA
automated the examiner time survey \21\ and enhanced examiner training
and guidance. The agency also initiated a task force to conduct a
comprehensive review of the OTR, in part to better define insurance-
related activities. In October 2003, GAO issued report GAO-04-91 \22\
recommending continuous improvement of the process for and
documentation of the OTR, updating the rate annually, and completing
the examiner time surveys with full representation. Noting the task
force review, NCUA agreed to set the rate annually, improve the
methodology and documentation, and ensure examiner time survey sampling
was statistically valid.
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\21\ The examiner time survey process is discussed in detail
later in this document.
\22\ http://www.gao.gov/new.items/d0491.pdf.
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The agency task force completed its review of the OTR in 2003 and
recommended a revised, comprehensive methodology for calculating the
OTR annually.\23\ The NCUA Board received comments from credit union
trade groups \24\ on the proposed revised methodology and ultimately
approved adoption of the revised methodology and an OTR of 59.8 percent
for fiscal year 2004 at the November 20, 2003, open Board meeting.\25\
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\23\ The pre-decisional staff proposal is available on NCUA's
Web site: https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/Additional%20Documents/2003%20Task%20Force%20Proposal.pdf.
\24\ A summary of the comments received is available on NCUA's
Web site: https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/Additional%20Documents/2003%20Summary%20of%20Pre-Adoption%20OTR%20Stakeholder%20Meeting%20Comments.pdf.
\25\ https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/2003OTRBAM.pdf.
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Using the revised methodology approved in 2003, the OTR approved
annually by the NCUA Board ranged between 52.0 percent and 57.2 percent
for fiscal years 2005 through 2010. The NCUA Board approved funding for
an independent review of the OTR at the November 2009 open Board
meeting. PricewaterhouseCoopers issued its first of two reports to NCUA
in January 2011.\26\ Based on the 2011 PricewaterhouseCoopers report,
the definitions used in the examiner time survey were clarified over
the next two ETS cycles.
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\26\ https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/2011PwCOTRReview.pdf.
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The 2010-2011 ETS cycle defined insurance-related and non-insurance
related activities as follows: \27\
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\27\ As described in the ETS section, the ETS cycle runs from
June 1, Year 1 to May 31, Year 2. The PricewaterhouseCoopers report
was issued mid-cycle, January 2011.
Insurance Related Examination Procedures--Insurance Related
examination or supervision contact procedures address safety and
soundness issues. On the time survey forms, respondents should
classify the time used to evaluate safety and soundness as
``insurance related.'' ``Insurance Related'' time is
Evaluating financial trends and Call Report data
Determining the credit union's solvency position
Evaluating risks, and potential costs, the credit union
presents to the NCUSIF (when appropriate)
Assessing management's efforts to protect earnings and
net worth by identifying, evaluating, controlling, and monitoring
internal and external risks
Assessing management's abilities to develop strong
policies and a reliable internal control structure
Non-Insurance Related Examination Procedures--Non-Insurance
Related examination or supervision contact procedures address
compliance with the laws and regulations that NCUA enforces. On the
survey forms, respondents should classify the time used to evaluate
issues not related to safety and soundness
Compliance with consumer protection laws, NCUA Rules
and Regulations, the FCU Act, and Bylaws
Review of previously cited regulatory violations, areas
of concern, and corrective actions taken
Call report accuracy and timeliness
After the issuance of the PricewaterhouseCoopers report in January
2011, NCUA improved the ETS Instruction definitions for insurance and
non-insurance related activities for the 2011-2012 ETS cycle.
Specifically, new categories were established to help examiners
distinguish between regulations established to protect the NCUSIF,
labeled ``insurance regulatory'', from regulations established to
provide consumer protection or otherwise govern how federal credit
unions operate, labeled ``consumer regulatory.'' This resulted in a
more accurate assessment of insurance related activities (including
insurance-regulatory) and consumer regulatory or non-insurance related
activities. NCUA solicited comments from representatives of key
stakeholders on the proposed changes to the definitions of the agency's
activities as they related to the OTR methodology.\28\ The 2011-2012
ETS Instructions contained the following definitions:
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\28\ This included the Credit Union National Association, the
National Association of Federal Credit Unions, the National
Association of State Credit Union Supervisors, and the National
Federation of Community Development Credit Unions.
Insurance Related Examination Procedures--No change from 2010-
2011 ETS Instruction definition stated above.
Insurance Regulatory Related Examination Procedures--Insurance
Regulatory related examination or supervision contact procedures
address regulations that are not designed to protect consumers
directly. This includes assessing compliance with all regulations
outside of consumer oriented regulations--see listing of consumer
regulations in the following section--Consumer Regulatory
examination procedures. Insurance Regulatory related regulations
include those regulations that address safety and soundness issues.
Examples include (this is not all inclusive):
701.21--Loans to Members and Lines of Credit to Members
[cir] Includes total loan limit to one individual, limitation on
maturity, rate of interest, and security.
702--Prompt Corrective Action
[cir] Establishes net worth categories and mandatory and
discretionary supervisory actions
703--Investments and Deposit Activities
[cir] Establishes permissible investments and requires credit
analysis prior to purchase and requires ongoing monitoring of
securities
712--Credit Union Service Organizations
[cir] Establishes investment and loan limits as well as outlines
permissible activities
713--Fidelity Bond and Insurance Coverage
[cir] Requires minimum bond coverage
715--Supervisory Committee Audits and Verifications
722--Appraisals
[cir] Establishes minimum appraisal standards based on loan size
723--Member Business Loans
[cir] Establishes prohibited activities, requires specific
policies and sets overall loan limits as well as limits to one
member or group of associated members
Consumer Regulatory Related Examination Procedures--Consumer
Regulatory Related examination or supervision contact procedures
address compliance with consumer regulations. The regulations
include:
Reg. B--Equal Credit Opportunity Act
BSA--Bank Secrecy Act
Reg. C--Home Mortgage Disclosure Act
Reg. CC--Expedited Funds Availability
COPPA--Children's Online Privacy Protection Act
Reg. D--Reserve Requirements
Reg. E--Electronic Funds Transfer Act
[[Page 4808]]
FACTA--Fair and Accurate Credit Transactions Act
FCPR--Fair Credit Practice Rule
FCRA--Fair Credit Reporting Act
FDCPA--Fair Debt Collections Practices Act
FDPA--Flood Disaster Protection Act
FHA--Fair Housing Act
GLBA--Gramm-Leach Bliley Act
HOEPA--Home Ownership and Equity Protection Act
HOPA--Home Owner's Protection Act
Reg. M--Consumer Leasing
OFAC--Office of Foreign Asset Control
PCFI--Privacy of Consumer Financial Information
RFPA--Right to Financial Privacy Act
SCRA--Service Members Civil Relief Act
Reg.--X Real Estate Settlement Procedures Act
Credit Card Act
Unlawful Internet Gaming Enforcement Act
SAFE Act--Secure and Fair Enforcement for Mortgage
Licensing Act
Reg.--Z Truth in Lending
Rules and Regulations Part 706--Credit Practices
Rules and Regulations Part 707--Truth in Savings
Rules and Regulations Part 717--Fair Credit Reporting
In 2012, the Office of Examination and Insurance (E&I) further
clarified the application of the insurance-related and non-insurance
related definitions in the ETS. Specifically, all relevant NCUA
regulations were explicitly mapped to the survey classifications to
provide more uniformity and consistency of reporting. This breakdown
and mapping of regulations was consistent with the existing overall
definitions of insurance-related and non-insurance related activities.
The primary definitions did not change; the regulations were merely
explicitly mapped based on the overarching definitions. This
clarification resulted in more consistency by respondents on the ETS.
Appendix A contains the mapping provided to ETS participants. In 2013,
NCUA also obtained an independent review of the mapping of the
regulations from PricewaterhouseCoopers.\29\ The mapping of NCUA's
regulations outlined in the PricewaterhouseCoopers October 2, 2013
report, is available on NCUA's Web site.
---------------------------------------------------------------------------
\29\ https://www.ncua.gov/About/Documents/Budget/2013/2013ETSAnalysis.pdf.
---------------------------------------------------------------------------
Based on the validated mapping of NCUA regulations to guide
examiners in completing the annual time survey, the average survey
results for insurance related activities increased from 67 percent to
88 percent of examiner time. This resulted in an OTR for 2014 of 69.2
percent, which was approved at the November 2013 open NCUA Board
meeting. The OTR rose to 71.8 percent for 2015 and to 73.1 percent for
2016. Figure 1 shows the trends in the OTR since 2004.\30\
---------------------------------------------------------------------------
\30\ The dollar amount of the OTR in this graph is based on the
NCUA Board approved budget, not actual expenditures. The OTR is
applied to actual expenses incurred each month.
[GRAPHIC] [TIFF OMITTED] TN27JA16.000
Since the creation of the NCUSIF in 1970, NCUA's allocation of
funds between its dual roles has evolved to address changes in the
credit union system and changes to NCUA operations. As credit unions
have become larger and more complex, the potential risk to the NCUSIF
has increased. As a result, NCUA's operations have adapted. This has
resulted in an increased focus on insurance-related activities, and
this focus remains in place today.
The FCU Act and NCUA Rules and Regulations have also evolved in
recent history, and as a result, the agency has placed more of a focus
on safeguarding the NCUSIF. In particular:
1. The Credit Union Membership Access Act (CUMAA) was enacted into
law in 1998.\31\ This law resulted in new obligations on credit unions
and NCUA designed to protect the NCUSIF, such as:
---------------------------------------------------------------------------
\31\ https://www.ncua.gov/Resources/Documents/LCU1998-16.pdf.
---------------------------------------------------------------------------
a. Imposing new requirements on federally insured credit unions
with respect to financial statements and audits, and member business
loans.\32\
---------------------------------------------------------------------------
\32\ CUMAA imposed a new aggregate limit on a credit union's
outstanding member business loans of the lesser of 1.75 times the
credit union's net worth or 12.25% of the credit union's total
assets.
---------------------------------------------------------------------------
[[Page 4809]]
b. Establishing a new system of tiered capital requirements for all
federally insured credit unions.\33\
---------------------------------------------------------------------------
\33\ A net worth standard of 7 percent of assets was established
for insured credit unions, as well as risk-based capital standards
for ``complex'' credit unions as defined by NCUA. For credit unions
not meeting these standards, progressively more stringent ``prompt
corrective action'' requirements apply.
---------------------------------------------------------------------------
2. During the aftermath of the financial crisis, from 2010 to 2015,
the NCUA Board strengthened critical safety and soundness rules, such
as:
a. Codifying interest rate risk guidance into a rule ensuring that
federally insured credit unions holding the vast majority of the credit
union system's assets have appropriate policies to manage interest rate
risk in adverse scenarios.
b. Designing a targeted emergency liquidity rule ensuring that
federally insured credit unions at various asset levels have scalable
contingency plans to tap reliable sources of liquidity during a crisis.
c. Establishing concentration limits and required due diligence on
loan participations.
3. From 2011 through 2015, NCUA also modernized various regulations
to provide credit unions with more flexibility and authority.\34\ While
these modernized rules reduced compliance burdens, they resulted in
examiners devoting more time to ensuring safety and soundness through
the examination process rather than relying on regulatory limits. For
example, NCUA:
---------------------------------------------------------------------------
\34\ https://www.ncua.gov/newsroom/Pages/RegulatoryModernizationInitiativeResults.pdf.
---------------------------------------------------------------------------
a. Expanded regulatory relief eligibility for small and non-complex
credit unions.
b. Eliminated the fixed assets cap for FCUs.
c. Eased troubled debt restructuring rules.
d. Authorized ``plain-vanilla'' derivatives for FCUs.
Since 2001, various independent third-party assessments have also
resulted in recommendations to improve and refine the OTR methodology,
most of which NCUA has adopted.\35\ NCUA is now seeking public comment
on the current OTR methodology, as described throughout the remainder
of this document, for possible additional improvement.
---------------------------------------------------------------------------
\35\ For a discussion of recommendations not adopted and the
associated rationale, see the Overhead Transfer Rate (OTR)--Timeline
on NCUA's website at https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/overhead-transfer-rate-chronology.pdf.
---------------------------------------------------------------------------
IV. Detailed Discussion of OTR Methodology
a. Examination Time Survey
NCUA's mission is to foster the safety and soundness of federally
insured credit unions, which is primarily achieved through its
examination program. Consequently, the majority of NCUA's resources are
dedicated to the examination and supervision of federally insured
credit unions. Examiners expend time on both regulatory and insurance
activities during examinations and supervision contacts at FCUs.
Therefore, one of the key components needed to calculate the cost for
NCUA's regulatory role and insurance roles is the annual ETS. The ETS
applies only to FCU examination and supervision contacts, as
examinations (insurance reviews) of FISCUs have by definition the sole
purpose of managing risk to the NCUSIF. The Board invites comment on
the existing ETS process.
Since its inception in 1985, the ETS evolved from a manually
completed form to the automated system used now. From 1985 to 1994,
NCUA collected 1,000 to 1,200 manually completed survey forms annually.
Survey forms were completed by participants for each FCU examination
(work classification code [WCC] 10) and each FCU supervision contact
(WCC 22). Since survey results were consistent, NCUA reduced the sample
size considerably and instead of annual collection, moved to a 3-year
cycle. In 1994, 1997, and 2000, the sample size ranged from 60 to 100
survey forms. There were no surveys completed in 2001.
In 2001 Deloitte & Touche completed a study of the ETS process and
concluded it was reasonable and appropriate for use in allocating
NCUA's costs between insurance-related and regulatory-related
activities.\36\ The study included some recommendations to enhance the
survey process, such as automating the survey form, improving
communications, and varying the period of collection, but did not
recommend any changes to the survey's content. NCUA implemented those
recommendations.
---------------------------------------------------------------------------
\36\ The Deloitte & Touche Study is available on NCUA's public
website. https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/2001DeloitteReportonOTRProcess.pdf.
---------------------------------------------------------------------------
In 2002, E&I randomly selected one Supervisory Examiner (SE) group
(via lottery draw) from each region to participate in the survey
process. The regions selected three experienced Principal Examiners
(PEs) from these SE groups to complete surveys for all FCU examination
and supervision contacts initiated and completed during the ETS period.
Since 2002, the participating SE groups in each region have rotated
annually. The annual rotation ensures representative coverage of the
population of FCUs across each region while minimizing the burden on
field staff.
From 1985 through 2000, examiners completed time surveys during a
set period, often occurring near the end of the exam program year.
Starting in 2002, examiners completed surveys for all examination and
supervision contacts they conducted during a 12-month period that
starts on June 1, and ends on May 31, of the following year. Utilizing
groups from all of NCUA's regions and collecting the data throughout a
12-month period provides a variety of FCUs, completion dates, and
geographic locations resulting in a sample that better represents the
entire population.
Prior to introducing the automated form, NCUA did not provide
formal training to survey participants. Beginning in 2002, E&I held a
training session and a subsequent teleconference for the selected
participants, their supervisors, and a regional office analyst from
each region. E&I also dedicated an email address for examiners to use
to request help with the survey. In addition, E&I created a shared
electronic database to store information such as answers to Frequently
Asked Questions (FAQs), summary reports, and training information.
Since 2002, communications regarding the survey process have
improved, which helps to ensure consistent application and reliable
results. E&I provides training prior to the start of every ETS cycle;
including:
A discussion of the objectives of the ETS and its
importance in determining the OTR,
how to access and complete the ETS form,
how to classify examination and supervision activities,
how to correct data if necessary,
a review of tools for reporting hours,
expectations of the ETS participants, and
resources available to the participants.
The instructions provided to the ETS participants are included in
Appendix B.
As previously discussed, the NCUA Board approved funding for an
independent review of the OTR at the November 2009 open Board meeting.
PricewaterhouseCoopers' January 2011 report resulted in several changes
to the
[[Page 4810]]
ETS.\37\ The definitions used in the ETS were modified to more clearly
define the work of NCUA's examination staff. Specifically, all relevant
NCUA regulations were explicitly mapped to the survey classifications
to provide more uniformity and consistency of reporting. The report
also recommended that NCUA use sample sizes that are consistent with
the calculated sample sizes for the two main types of activities (i.e.
programs) under survey, and specifically, that NCUA consider increasing
the sample sizes for the federal supervision program. To improve the
confidence interval, E&I chose one additional SE group per region to
increase the number of supervision surveys. As the report concluded the
examination survey size met the desired confidence level, the
additional SE group was instructed to upload only the supervision
contacts the PEs completed during the ETS period. This reduced the
overall burden of completing the surveys for additional examinations.
---------------------------------------------------------------------------
\37\ https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/2011PwCOTRReview.pdf.
---------------------------------------------------------------------------
At the end of each ETS period, NCUA monitors the results of the
time study to ensure the sample size is statistically valid. Using the
ETS examination upload report, NCUA calculates the mean and standard
deviation for percentage of consumer regulatory hours of the WCC 10
examination uploads. For the most recent ETS period, there were 142 WCC
10 examination uploads with a total of 2,621.6 consumer regulatory
hours. The mean was calculated to be 13.37 percent and the standard
deviation was 9.09 percent. A statistically valid sample size is
calculated for 99 percent, 95 percent, and 90 percent confidence
intervals using these statistics, the corresponding Z factor from a
standard normal distribution table, and a 3 percent margin of error.
Table 1 illustrates the calculations for the most recent ETS period.
NCUA's sample size of 142 exceeds the 60.92 necessary to achieve a 99
percent confidence interval.
Table 1--Sample Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
C P = (100%-C)/2 X S Z E N = ((Z*S)/
----------------------------------------------------------------------------------------------------------------------------------------- e)\2\
Confidence Standard From standard Margin of ---------------
Confidence interval factor Mean deviation normal tables error Sample size
--------------------------------------------------------------------------------------------------------------------------------------------------------
99%................................................... 0.005 13.37 9.09 2.576 3.00 60.92
95%................................................... 0.025 13.37 9.09 1.960 3.00 35.27
90%................................................... 0.050 13.37 9.09 1.645 3.00 24.84
--------------------------------------------------------------------------------------------------------------------------------------------------------
NCUA also performs these calculations for the sample size for WCC
22 supervision contact uploads. Using the ETS WCC 22 upload report,
NCUA calculates the mean and standard deviation for percentage of
consumer regulatory hours of the WCC 22 supervision contact uploads.
For the most recent ETS period, there were 100 WCC 22 uploads with a
total of 350.4 consumer regulatory hours. The mean was calculated to be
16.9 percent and the standard deviation was 30.9 percent. Based on
these statistics, NCUA's sample size produces a confidence interval of
approximately 69 percent. To achieve a 95 percent confidence interval
with 3 percent margin of error, would require approximately 408
uploads. NCUA accepts a lower confidence interval for the WCC 22
uploads because the WCC 10 examination program is the primary focus of
the time study and to reduce the burden on field staff. Also, the
combined WCC 10 and WCC 22 contacts result in a sample size of 242
uploads with total of 2,972 hours. The mean of the combined sample
calculated to be 14.84 percent and the standard deviation was 21.07
percent. Using these statistics, a sample size of 151 provides a
greater than 99 percent confidence level. The sample size is sufficient
to provide reliable results.
In 2013, NCUA also obtained an independent review of the mapping of
the regulations.\38\ The mapping of NCUA's regulations is outlined in
PricewaterhouseCoopers' October 2, 2013 report, which is available on
NCUA's website and in Appendix A of this document. E&I reviews the
regulatory mapping prior to the beginning of each ETS cycle for any
necessary updates.\39\ Going forward, NCUA intends to clearly state in
the preamble to proposed rules whether a rule is promulgated under its
Title II authority (insurance) or its Title I authority (regulatory).
---------------------------------------------------------------------------
\38\ https://www.ncua.gov/About/Documents/Budget/2013/2013ETSAnalysis.pdf.
\39\ The current mapping has not been updated for NCUA's most
recent final rules. Similar to other activities not explicitly
classified in the ETS instructions, ETS participants defer to the
overarching definitions of insurance and non-insurance related
activities provided in the ETS instructions (see Appendix B) to
appropriately allocate time as insurance or non-insurance.
---------------------------------------------------------------------------
As stated earlier, two SE groups from each region participate in
the ETS process. One group uploads both FCU examination contacts and
FCU on-site supervision contacts while the second SE group uploads only
FCU on-site supervision contacts. All PEs in the selected groups
participate in the survey. PEs are selected because they possess the
necessary level of experience to ensure accurate results where examiner
judgment is necessary. If an SE group has less than four PEs, a second
group is added to ensure an adequate number of examinations and
supervision contacts are uploaded for a statistically relevant sample.
The participating SE groups rotate each year in alphabetical order
(Group A one year, Group B the next year, etc.) to ensure a fair
distribution of work and to ensure a wider number of FCUs are captured
in the survey over time. PEs who transfer to a different SE group
during the ETS period continue uploading surveys until the survey cycle
ends. However, PEs from a non-participating group that transfer into a
group participating in the ETS do not upload any time surveys.
NCUA utilizes its Automated Integrated Regulatory Examination
System (AIRES) examination system to capture the ETS information. There
are twelve categories of activities on the survey form, modeled on the
risk-based examination program. The scope categories are:
1. Planning/Scope Development
2. Call Report Review
3. Supervisory Committee Review
4. Financial Analysis
5. Loan Analysis
6. Investment Analysis
7. Liquidity Analysis
8. Asset Liability Management
9. Compliance
10. Information Systems Technology
11. Management Analysis
[[Page 4811]]
12. Contact Report/Joint Conference/Follow-Up Procedures
For each examination or supervision contact, the examiner inputs
the hours spent on insurance, insurance regulatory related and non-
insurance and consumer regulatory related activities in each of the
categories. A full year's worth of survey results are used to calculate
the percentage of hours devoted to regulatory and insurance-related
(insurance and regulatory) activities for the Federal Examination and
Federal Supervision Programs. As previously mentioned, the ETS period
runs from June 1 to May 31. Only examinations started after June 1 and
completed and uploaded by the following May 31 are included in the
survey to maintain consistency.
Results of the ETS
The ETS is used to determine the percentage of Workload Budget
Hours related to regulatory and insurance-related tasks for the
following two programs:
Federal Examination (WCC 10); and
Federal Supervision (WCC 22).
NCUA uses a full year's worth of survey results when determining
the regulatory cost driver applied to the budgeted workload hours for
its Core Programs and Special Programs. The Workload Budget is
discussed later in this document. The results of the ETS concluded on
May 31, 2015 are illustrated in Table 2.
Table 2--Results of ETS
----------------------------------------------------------------------------------------------------------------
Non-insurance
Contact type (WCC) Total surveys Insurance related %
collected related % (regulatory)
----------------------------------------------------------------------------------------------------------------
Examination (WCC 10)............................................ 142 86.83 13.17
Supervision (WCC 22)............................................ 100 87.21 12.79
-----------------------------------------------
Total....................................................... 242 86.87 13.13
----------------------------------------------------------------------------------------------------------------
Table 3 shows the ETS results by the scope categories.
Table 3--ETS Results by Scope Category
------------------------------------------------------------------------
Non-insurance
Time category results Insurance related %
related % (regulatory)
------------------------------------------------------------------------
Planning/Scope Development.............. 85.95 14.05
Call Report Review...................... 95.61 4.39
Supervisory Committee................... 94.61 5.9
Financial Analysis...................... 96.98 3.02
Loan Analysis........................... 93.65 6.35
Investment Analysis..................... 93.05 6.95
Liquidity Analysis...................... 93.84 6.16
Asset Liability Management.............. 96.15 3.85
Compliance.............................. 41.28 58.72
Information Systems Technology.......... 81.28 18.72
Management.............................. 90.73 9.27
Examination Report/JC/Follow-Up......... 89.85 10.15
-------------------------------
Total............................... 86.87 13.13
------------------------------------------------------------------------
NCUA also reviews the ETS results by CAMEL code. For the most
recent ETS period, NCUA calculated the number of contacts by CAMEL Code
as a percentage of the sample size. The results are documented in Table
4. The percentage of WCC 10 examinations by CAMEL code correlate
strongly with the total FICU population at May 31, 2015. As expected
the percentage of WCC 22 supervision contacts is weighted more heavily
toward CAMEL 3 and CAMEL 4 FICUs since supervision is focused on credit
unions with financial and operational weaknesses.
Table 4--CAMEL Code Distribution
----------------------------------------------------------------------------------------------------------------
Percent of sample
-----------------------------------------------
CAMEL code WCC 10 WCC 22 Total FICU
examination supervision population
(%) (%) (%)
----------------------------------------------------------------------------------------------------------------
1 & 2........................................................... 71.83 22.00 73.56
3............................................................... 24.65 51.00 22.41
4............................................................... 3.52 27.00 3.90
5............................................................... 0.00 0.00 0.13
----------------------------------------------------------------------------------------------------------------
[[Page 4812]]
As Table 2 and Table 3 show, the ETS determined NCUA examiners
spend 86.87 percent of their time on insurance related activities and
13.13 percent of their time on non-insurance related activities during
examinations and supervision contacts between June 1, 2014 and May 31,
2015. As the next section will describe, the results of the ETS are
applied to NCUA's budgeted workload program hours to determine the
agency's budgeted hours for insurance and non-insurance related
activities.
b. Workload Program Hours
This step in NCUA's OTR calculation determines the percentage of
work the agency expects to perform in insurance and non-insurance
related activities. Specifically, the results of the ETS,\40\ and the
assessment of work performed for other programs administered by other
offices \41\ are applied to the workload program hours derived from
NCUA's annual resource budget. This results in a weighted average of
program hours devoted to NCUA's regulatory and insurance roles.
---------------------------------------------------------------------------
\40\ Discussed in Section IV.a.
\41\ Including programs administered by the Office of Small
Credit Union Initiatives (OSCUI) and the Office of Consumer
Protection (OCP) as discussed in Section IV.c.
---------------------------------------------------------------------------
NCUA's annual resource budget is a comprehensive workload analysis
that captures the amount of time budgeted to conduct examinations and
supervision of federally insured credit unions, and other programs
necessary to carry out NCUA's dual mission as insurer and regulator.
The annual resource budget estimates hours in three major categories:
\42\
---------------------------------------------------------------------------
\42\ Time budgeted for core and special programs is considered
productive time, while administrative hours are considered non-
productive time. These classifications are used during the SSA
Imputed Value step of the OTR calculation.
---------------------------------------------------------------------------
1. Core Programs includes NCUA's FCU and FISCU examinations and on-
and off-site supervision.
2. Special Programs includes NCUA's specialized examination
programs in the areas of capital markets, information systems, and
lending, credit union service organization (CUSO) reviews, chartering
and field of membership, and small credit union development.
3. Administrative includes NCUA field staff time related to
training and staff development, leave, and travel.
The annual resource budget process starts with a planning session
with management representatives from each field office,\43\ OCP and
E&I. During the planning session, resource requirements for programs
such as focused areas of review,\44\ central office details, and
working groups are vetted. Examination and supervision requirements are
also reviewed and guidance is issued to all field staff. NCUA field
staff review each FICU in their district \45\ to determine the
anticipated number of workload hours \46\ needed for the next calendar
year. The workload estimates are refined by field management to ensure
consistency. Field offices submit their final resource budget proposals
to E&I for review and analysis. E&I reviews the program recommendations
from the field offices and submits any recommendations for adjustments
to the Executive Director. The final resource budget for each field
office establishes the foundation for their budget requests and is used
to allocate the results of the ETS.
---------------------------------------------------------------------------
\43\ Field office refers to each of NCUA's five Regional Offices
and the Office of National Examinations and Supervision (ONES).
\44\ Each year NCUA issues a Letter to Credit Unions outlining
the Supervisory Priorities for the year. https://www.ncua.gov/regulation-supervision/Pages/policy-compliance/communications/letters-to-credit-unions/2016/01.aspx.
\45\ NCUA examiners are assigned a district of specific FCUs and
FISCUs and are responsible for managing examination and supervision
of the credit unions assigned to their district.
\46\ Workload hours include hours for examinations, on- and off-
site supervision, and reviews by regional and national specialized
examiners.
---------------------------------------------------------------------------
Table 5 shows the 2016 budgeted hours for NCUA's core and special
programs and how those hours are allocated to non-insurance related
activities based on the results of the ETS. Administrative time is not
allocated in this step of the OTR calculation.
Table 5--Allocation of Budgeted Program Hours
----------------------------------------------------------------------------------------------------------------
2016 budgeted Non-insurance Non-insurance
workload hours percent hours \47\ Allocation basis
----------------------------------------------------------------------------------------------------------------
Core Programs.................... 728,556 na 70,691 Sum of Core Programs
Federal Examination.............. 454,115 13.17% 59,807 Examiner time survey
Federal Supervision.............. 53,687 12.79% 6,867 Examiner time survey
State Exam & Supervision......... 175,722 0% 0 FISCU work is
insurance-related
State Exam Review................ 5,321 0% 0 FISCU work is
insurance-related
5300 Program--FCU................ 30,503 13.17% 4,017 Uses FCU examination
results from
examiner time
survey
5300 Program--FISCU.............. 9,208 0% 0 FISCU work is
insurance-related
Special Programs................. 35,637 na 2,607 Sum of Special
Programs
Regional Lending Specialists..... 4,190 13.17% 552 Allocation based on
% from time surveys
Regional Capital Market 4,130 0% 0 NCUSIF risk
Specialists. management program
Regional Information Systems 3,320 13.17% 437 Allocation based on
Officers. % from time surveys
Field of Membership & Chartering. 500 100.00% 500 Regulatory program
Small Credit Unions.............. 18,633 6.00% 1,118 Allocation based on
OSCUI's time
reporting results
CUSO Examinations................ 4,864 0% 0 NCUSIF risk
management program
------------------------------------------------------------------------------
Total Core & Special Programs 764,193 na \48\ 73,298 ....................
----------------------------------------------------------------------------------------------------------------
Percent of 2016 core and special programs devoted to NCUA's Non- 9.6% = 73,298 / 764,193
Insurance Role.
----------------------------------------------------------------------------------------------------------------
Detailed Explanation of Allocation Basis
Table 5 shows how NCUA's core and special program hours are
allocated to non-insurance and thereby insurance related activities. A
detailed explanation of the allocation basis for each core program and
special program is outlined below.
---------------------------------------------------------------------------
\47\ Numbers may not reconcile exactly due to rounding.
\48\ These are the budgeted hours allocated to insurance-
related, regulatory work in 2016.
---------------------------------------------------------------------------
Core Programs
NCUA's federal examination and federal supervision programs' non-
insurance related activities are allocated at 13.17 percent and 12.79
percent, respectively, based on the results of the
[[Page 4813]]
ETS.\49\ The results of the ETS from June 2014 to May 2015 determined
that examiners spent 13.17 percent of their time on non-insurance
related activities during the examination of FCUs and 12.79 percent of
their time on non-insurance related activities during the supervision
of FCUs. These percentages (13.17 percent and 12.79 percent) are
respectively applied to the 2016 budgeted hours for federal
examinations and federal supervision to determine the number of hours
for non-insurance related activities.
---------------------------------------------------------------------------
\49\ The results of the time study are documented in Tables 2
and 3.
---------------------------------------------------------------------------
NCUA examiners conduct examinations and supervision of FISCUs, and
generally do so in conjunction with the governing state supervisory
authority (SSA). It is also NCUA's policy to conduct reviews of
examinations completed by the SSA. NCUA's FISCU related work
(examinations, supervision and state exam reviews) is solely associated
with the agency's role as an insurer. For purposes of calculating the
OTR, 100 percent of the budgeted hours for FISCU examinations,
supervision and state examination reviews are allocated to insurance-
related activities.
All federally insured credit unions file quarterly 5300 Call
Reports with NCUA. NCUA examiners are responsible for performing
quarterly reviews of the 5300 Call Report information for all federally
insured credit unions in their district. For FCUs, NCUA examiners are
also responsible for validating the information submitted by the FCUs.
For this reason, more time is budgeted for the federal 5300 program
than for the state 5300 program. An extension of the examination
program, the budgeted hours for the federal 5300 program are allocated
as insurance and non-insurance hours based on the results of the ETS
for federal examinations. Thus, 13.17 percent of federal 5300 program
hours are allocated to non-insurance activities. Consistently, the
budgeted hours for the state 5300 program are allocated the same as the
FISCU examination program, 100 percent to insurance related activities.
Special Programs
Regional lending, information technology and capital market
specialists participate in the examination and supervision of federally
insured credit unions to perform focused reviews of more complex areas
of credit union operations. Regional specialists do not participate in
the ETS. The work performed by regional lending and information
technology specialists is a combination of insurance and non-insurance
related activities. Therefore, the budgeted hours for regional lending
specialists and regional information systems officers is allocated
conservatively at 13.17 percent for non-insurance related activities,
based on the ETS results. The work performed by regional capital market
specialists is focused on credit unions' asset liability management and
serves as a risk management program for the NCUSIF. Thus, budgeted
hours for regional capital market specialists is allocated 100 percent
to insurance-related activities.
NCUA budgets hours for examiners to support OCP with chartering and
field of membership applications and expansion requests. One-hundred
percent of the hours budgeted for examiners to assist with this
activity are allocated to NCUA's non-insurance function.
NCUA also budgets hours for examiners to support OSCUI with
providing assistance to small credit unions. The budgeted hours for
examiner participation in the small credit union program are allocated
to insurance and non-insurance related activities on the same basis as
the OSCUI programs. As described in the financial budget section, OSCUI
conducts its own time survey each year and has determined that 6
percent of its work should be allocated to non-insurance related
activities. Thus, NCUA allocates 6 percent of these budgeted workload
hours to non-insurance related activities.
The agency's CUSO examination program is a risk-management program
focused on protecting the NCUSIF (NCUA does not charter and has no
regulatory authority over CUSOs). Thus, 100 percent of the hours
budgeted for CUSO examinations is allocated to insurance related
activities.
As Table 5 shows, the combination of non-insurance workload hours
for core and special programs is compared to the overall workload
budget for those programs, to develop the overall weighted average of
non-insurance related work across all programs. The percentage of non-
insurance activities derived from the ETS and the annual resource
budget are applied to NCUA's Operating Budget as outlined in the
Financial Budget section.
c. Financial Budget
NCUA's budget process uses the agency's strategic goals and
objectives set forth in the NCUA Strategic Plan as a framework to
ensure agency priorities and initiatives drive resulting resource needs
and allocations. The annual budget provides the resources to execute
the strategic plan and undertake tasks in NCUA's major programs.
Each NCUA office develops a budget request identifying resources
required to support NCUA's mission and strategic goals and objectives.
These budgets are developed using zero-based budgeting techniques to
ensure each office's requirements are individually justified and
consistent with the agency's overall strategic plan. One of the primary
inputs in the development of the financial budget is the workload
analysis described in the workload budget section. The final workload
analysis establishes the foundation for the field office budget
requests in addition to establishing the amount of work related to
insurance and non-insurance related activities for the OTR. The
workload analysis is also used to develop personnel and travel costs,
and all offices develop cost estimates for fixed and recurring items
such as rent or leased property, operations and maintenance, repair on
owned facilities, supplies, telecommunications, and other
administrative and contracted services costs. Information related to
NCUA's budget process, including detailed information on the NCUA
Board-approved 2016 Operating Budget are available on the agency's Web
site.\50\
---------------------------------------------------------------------------
\50\ https://www.ncua.gov/About/Pages/budget-strategic-planning/supplementary-materials.aspx.
---------------------------------------------------------------------------
Table 6 shows how NCUA's 2016 Operating Budget is allocated to non-
insurance related activities, using the weighted average derived from
the core and special programs (9.6 percent) and the results of the
assessment of insurance and non-insurance related activities for
programs administered by other offices. The allocation basis for all
offices is outlined in detail below Table 6. The Board invites comment
on the current process for allocating NCUA's Operating Budget used in
the OTR calculation.
[[Page 4814]]
Table 6--Allocation of NCUA Operating Budget
----------------------------------------------------------------------------------------------------------------
Dollar budget Non-insurance Non-insurance
Cost area 2016 Financial Budget ($M) percent cost ($M)
----------------------------------------------------------------------------------------------------------------
All Regional Costs: Based on non-insurance related portion of $155.49 9.6% $14.91
core and special programs......................................
Asset Management Assistance Center and Assistance Program: $6.92 0% $0
Manages liquidation payouts, assets acquired from liquidations
and assistance programs, and recoveries for the NCUSIF.........
Office of Consumer Protection: Primarily non-insurance $9.54 82.3% $7.86
(regulatory) function i.e. chartering/FOM--net of work related
to share insurance coverage for members and FISCUs.............
Office of Small Credit Union Initiatives: Ensures small credit $6.37 6.0% $0.38
unions operate in safe and sound manner through its consulting
program. However, it also addresses consumer regulatory issues.
Office of National Examinations and Supervision: NCUSIF risk $10.48 0% $0
management function to supervise corporate credit unions and
large natural person credit unions. CFPB examines the natural
person credit unions assigned to this office for consumer
compliance.....................................................
Office of Minority and Women Inclusion.......................... $2.94 86.0% $2.53
All Other Offices \51\: Based on non-insurance percent of core $99.18 9.6% $9.51
and special programs...........................................
-----------------------------------------------
Total 2016 NCUA Budget...................................... $290.92 .............. $35.19
----------------------------------------------------------------------------------------------------------------
Explanation of Allocation Basis For Financial Budget
Regional Offices
The financial budget for the agency's five regional offices is
allocated based on the weighted average of non-insurance and insurance
related activities calculated in the workload budget section. Resources
in the regions execute NCUA's core and special programs, thus, the
budgeted costs related to these programs should receive the same
allocation basis as the programs themselves--as determined by the ETS.
The budget for the regional offices is allocated at 9.6 percent for
non-insurance related activities.
AMAC
NCUA conducts credit union liquidations and performs management and
recovery of assets through the Asset Management and Assistance Center
(AMAC). AMAC assists NCUA regional offices with the review of large,
complex loan portfolios and actual or potential bond claims. It also
participates extensively in the operational phases of conservatorships
and records reconstruction. The purpose of AMAC is to manage and reduce
costs to the NCUSIF and credit union members of credit union failures.
Thus, 100 percent of AMAC's activities are allocated as insurance-
related.
---------------------------------------------------------------------------
\51\ The weighted average, previously determined, is applied to
all other cost centers (CFO, human resources, etc.) as these are
overhead functions that support the agency's mission.
---------------------------------------------------------------------------
OCP
OCP is responsible for NCUA's consumer financial literacy efforts,
consumer inquiries and complaints, consumer protection compliance and
rulemaking, fair lending examinations, interagency coordination and
outreach, chartering and field-of-membership matters, low-income
designations, charter conversions and bylaw amendments. OCP monitors
time performing insurance related activities, insurance-regulatory
related activities, and consumer-regulatory related activities by
division. OCP has four divisions:
Consumer Affairs,
Consumer Compliance Policy and Outreach,
Consumer Access, and
Consumer Access South
The Division of Consumer Access and Division of Consumer Access
South do not specifically track the amount of time devoted to insurance
related, insurance regulatory related, and consumer regulatory related
issues. Instead, these divisions have developed estimates by using
standard factors based on the type of work inherent in each project
category. The divisions assume the following, based on a blend of time
among Consumer Access Analysts, Technicians, and Specialists:
25 percent of time is devoted to determining if any safety
and soundness issues exist when processing various chartering and field
of membership expansion applications;
10 percent of time is devoted to addressing insurance
related questions, membership concerns, and bylaw disputes directly
relevant to consumer related regulatory concerns; and
The remaining 65 percent of time is devoted to regulatory
issues primarily pertaining to reviewing applications for new charters
and charter expansions to ensure the proposals are consistent with
regulatory requirements. To a lesser extent, the Divisions of Consumer
Access associate this time with the enforcement of NCUA's chartering
policies.
The Division of Consumer Compliance Policy and Outreach focuses on
consumer regulatory related issues and does not regularly work on
matters categorized as insurance related or insurance-regulatory
related in the ETS instructions. This division spends 100 percent of
productive time addressing regulations the ETS instructions classify as
consumer-regulatory related regulations. These regulations include
regulations implementing the Equal Credit Opportunity Act, the Home
Mortgage Disclosure Act, the Truth in Lending Act, and the Real Estate
Settlement Procedures Act. Therefore, OCP estimates this division
spends 100 percent of its time on consumer regulatory related issues.
The Division of Consumer Affairs develops estimates based on the
number of inquiries, complaints and telephone calls processed by staff,
and the average amount of time needed to address those contacts. OCP
estimates the Division of Consumer Affairs spends:
5 percent of the division's time addressing share
insurance questions received from consumers;
90 percent on consumer-regulatory related activities; and
5 percent of time administering the Financial Literacy
Program.
Based on the allocation method described above, 82.3 percent of
OCP's work is non-insurance related. This 82.3 percent is applied to
the OCP Operating Budget to determine the allocation of costs between
insurance and non-insurance related activities.
OSCUI
OSCUI supports the success of small credit unions through its four
main functional areas--training, grants and
[[Page 4815]]
loans, partnership and outreach, and consulting. The office only
monitors ETS activities for its consulting function. The other program
areas do not regularly work on matters categorized as insurance
related, insurance-regulatory related or consumer-regulatory related
functions but provide support for the consulting function.
OSCUI monitors time related to the ETS categories through data
collected during credit union consulting contacts. Since the consulting
work covers a wide range of topics (many of which don't cleanly fit
into an ETS activity category), OSCUI developed a weighting system to
measure ETS related activity. The weighting system identifies the
percentage of time allocated to each of the three ETS categories for
each consulting topic. OSCUI consultants (Economic Development
Specialists) record consulting time by topic. Time is allocated to the
ETS categories by multiplying the number of consulting hours per topic,
by the percentage of time allocated for the topic. The assumptions for
monitoring and allocation of time to ETS categories, and used to
develop the weighting system, are as follows:
Consulting assistance that helps credit unions address
safety and soundness issues is catalogued as an insurance related
activity.
Consulting assistance that addresses regulations that are
not designed to protect the consumer directly are catalogued as
insurance-regulatory related activity.
Consulting assistance that addresses regulations that are
designed to protect the consumer directly are catalogued as consumer-
regulatory related activity.
Table 7 documents each consulting topic and OSCUI's assumptions for
the ETS activity related to the topic. For example, OSCUI assigns
consulting work on asset liability management to an insurance-related
activity so it is weighted at 100 percent in that area; consulting work
related to investments is weighted 50 percent insurance related and 50
percent insurance-regulatory related.
OSCUI's Economic Development Specialists completed 11,003 hours of
assistance to credit unions enrolled in the OSCUI Consulting Program
during the ETS cycle ending on May 31, 2015. The hours were allocated
as follows:
7,952 (72 percent) insurance related activities addressing
safety and soundness issues.
2,434 (22 percent) insurance-regulatory related
activities.
617 (6 percent) consumer-regulatory related activities.
Based on the allocation method described above, 6 percent of
OSCUI's work is non-insurance (consumer regulatory) related. This 6
percent is applied to OSCUI's Operating Budget to determine the
allocation of costs between insurance and non-insurance related
activities.
Table 7--OSCUI Time Allocation
----------------------------------------------------------------------------------------------------------------
Percent Percent
insurance insurance- Percent consumer-
Consulting type of work related regulatory regulatory
activity related activity related activity
----------------------------------------------------------------------------------------------------------------
Asset Liability Management................................ 100 0 0
BSA/OFAC.................................................. 0 0 100
Budgeting................................................. 100 0 0
Collections............................................... 75 25 0
Consumer Compliance....................................... 0 0 100
Credit Committee.......................................... 60 20 20
Disaster Recovery......................................... 70 20 10
FOM Expansion............................................. 50 50 0
Grant Writing............................................. 100 0 0
Internal Controls......................................... 100 0 0
Investments............................................... 50 50 0
Lending................................................... 70 20 10
Low-Income Designation.................................... 0 100 0
Marketing................................................. 50 40 10
Merger Guidance........................................... 50 50 0
New Product Development................................... 70 20 10
Net Worth Restoration Plan (NWRP)/Prompt Corrective Action 0 100 0
(PCA)....................................................
Operational Assistance Other.............................. 70 20 10
Other Policies............................................ 70 20 10
Recordkeeping............................................. 100 0 0
Relocation of Home Base CUs............................... 100 0 0
Secondary Capital......................................... 50 50 0
Strategic Issues Other.................................... 100 0 0
Strategic Planning........................................ 100 0 0
Succession Planning....................................... 70 20 10
Technology................................................ 70 20 10
Training.................................................. 70 20 10
Training Board............................................ 70 20 10
Training Staff............................................ 70 20 10
Training Supervisory Committee............................ 70 20 10
----------------------------------------------------------------------------------------------------------------
ONES
ONES oversees the unique examination and supervision issues related
to consumer credit unions with assets greater than $10 billion and all
corporate credit unions. ONES was established on January 1, 2013, but
was not assigned responsibility for consumer credit unions with $10
billion or more in assets until January 1, 2014. ONES did not complete
time surveys for its large natural person credit unions in 2014 or
2015, but will complete time surveys for all its large natural person
credit unions in 2016.
ONES does not have the ability to automatically complete and submit
the ETS for corporate credit unions since the corporate examination
program is not integrated into AIRES. ONES staff
[[Page 4816]]
manually completed the time survey two consecutive years (2011 and
2012) for all corporate credit unions following the E&I instructions.
ONES found the percentages of time allocated for the activities using
the E&I guidance did not substantially change year to year and used the
information from these two measurement periods as a baseline for
estimating and reporting the time allocated to Insurance Related,
Insurance Regulatory Related, and Consumer Regulatory Related
activities for the calendar years 2013, 2014, and 2015. ONES will
complete time surveys in 2016 for both corporate credit unions and
assigned natural person FCUs.
Because corporate credit unions do not perform and are not
responsible for Consumer Regulatory issues, this category is reported
as zero. The remaining time is allocated between Insurance Related and
Insurance Regulatory Related activities. ONES provides a report of
corporate credit unions with a table that breaks out the following
information:
Total Examination and Supervision hours
Total Insurance Related hours
Total Insurance Regulatory Related hours, and
Total Consumer Regulatory Related hours.
ONES reports the information for each corporate credit union. Total
examination and supervision hours are reviewed. The time allocations
derived from the 2011 and 2012 time surveys are applied to determine
the specific amounts of time reported for each category. ONES also
reviews each corporate credit union individually to ensure there were
no special circumstances that would have warranted a deviation from the
original surveyed estimates. ONES' estimates for the most recent ETS
period are shown in Table 8.
Table 8--Ones Time Allocation
----------------------------------------------------------------------------------------------------------------
Total
examination Insurance Consumer
Corporate credit union and Insurance regulatory regulatory
supervision related hours related hours related hours
hours
----------------------------------------------------------------------------------------------------------------
A............................................... 1654 1316 338 0
B............................................... 1124 942 182 0
C............................................... 1192 1007 186 0
D............................................... 1053 913 140 0
E............................................... 1353 945 409 0
F............................................... 769 514 256 0
G............................................... 567 332 235 0
H............................................... 981 788 194 0
I............................................... 575 387 188 0
J............................................... 621 415 205 0
K............................................... 95 6 89 0
L............................................... 694 607 87 0
M............................................... 481 357 124 0
N............................................... 919 712 207 0
Totals.......................................... 12,077 9,239 2,838 0
---------------------------------------------------------------
% of Total.................................. .............. 76.5% 23.5% 0.0%
----------------------------------------------------------------------------------------------------------------
Based on the allocation method described above, 100 percent of
ONES' work is insurance related. This percentage is applied to ONES'
Operating Budget to determine the allocation of costs between insurance
and non-insurance related activities.
Office of Women and Minority Inclusion (OMWI)
OMWI oversees the agency's equal employment opportunity program and
all matters relating to measuring, monitoring and establishing policies
for diversity in the agency's management, employment and business
activities as well as responsibility for assessing the diversity
policies and practices of entities regulated by the agency and
preserving credit unions designated as minority depository
institutions.
OMWI does not monitor time related to the ETS categories but does
estimate staff time spent on insurance related and non-insurance
related activities. The insurance related time is primarily time spent
administering and reporting to Congress on various programs, including
the agency's Minority Depository Institution Preservation Program and
responding to requests related to insurance-regulatory issues. Staff
working on tasks related to these activities includes the OMWI
Director, one Diversity Outreach Program Analyst, and one Management
Analyst.
OMWI estimates the percentage of time spent on these programs as
compared to the total time spent performing all tasks and
responsibilities for the Diversity Outreach Program Analyst, Management
Analyst, and OMWI Director. OMWI applies the estimated percentage of
time allotted to insurance activities to its total estimated working
hours. Then, those hours are compared to the estimated number of total
hours worked by all OMWI staff. OMWI's time estimates for the most
recent ETS period resulted in the following allocation:
14 percent of staff time spent on insurance related
activities; and
86 percent of time is spent on non-insurance activities.
Based on the allocation method described above, 86 percent of
OMWI's work is non-insurance related. This percentage is applied to
OMWI's Operating Budget to determine the allocation of costs between
insurance and non-insurance related activities.
All Other Offices
NCUA's remaining offices do not provide estimates on their
insurance and non-insurance related activities. Rather, because these
offices are support functions for NCUA's main program--the examination
and supervision of credit unions--the same allocation basis used for
the regional offices is used to determine the costs of insurance and
non-insurance related activities for these support functions. The
budgeted costs for the offices of the NCUA Board, Executive Director,
General Counsel, Chief Financial Officer, Chief Information Officer and
Chief Economist as well as Human Resources,
[[Page 4817]]
Examination and Insurance, Public and Congressional Affairs, and
Continuity and Security Management are allocated at 9.6 percent non-
insurance related activities for purposes of calculating the OTR.
Combining the calculation steps in the workload program hours and
financial budget section, the OTR methodology thus far has established
the amount of NCUA's Operating Budget related to insurance and non-
insurance related activities. NCUA's 2016 Operating Budget of $290.92
million includes $35.19 million allocated to non-insurance (regulatory)
activities. The remaining $255.73 million of NCUA's Operating Budget is
allocated to insurance-related activities. Identifying the portion of
NCUA's Operating Budget allocated to insurance-related activities is
the first step in determining NCUA's total insurance related costs.
Consideration must also be given to the direct costs to the NCUSIF and
the SSA Imputed Value, discussed in the next section.
d. Calculating NCUSIF Insurance and Non-Insurance Costs
Based on the ETS results for NCUA's core programs, the
determination of insurance and non-insurance activities for special and
other programs (Section IV.b) and applying the percentage of insurance
and non-insurance activities to NCUA's Operating Budget (Section IV.c),
the agency arrives at the dollar amount of insurance related costs
included in the NCUA Operating Budget. As noted above, for 2016, this
amount is $255.73 million (NCUA's 2016 Operating Budget of $290.92
million less non-insurance related costs of $35.19 million).
In addition to NCUA budgeted costs, there are operational costs
charged directly to the NCUSIF which must be added to the insurance
related portion of NCUA's Operating Budget when calculating the total
cost of providing insurance. For 2016, these direct operational costs
are budgeted at $1.56 million. The NCUSIF directly pays for the costs
associated with SSA staff attendance at NCUA-sponsored training and the
related travel expenses ($1.4 million), as well as SSA computer and
related equipment leases ($0.16 million). These direct operational
costs must be factored into the total operational costs of providing
NCUSIF insurance, which needs to be absorbed by all FICUs. NCUA does
not include credit union failure related costs \52\ in the calculation,
as these losses (charges to the NCUSIF) are already allocated based on
the mutual nature of NCUSIF deposit insurance and are not costs of
operating the NCUSIF.
---------------------------------------------------------------------------
\52\ Payouts on insured shares of failed institutions.
---------------------------------------------------------------------------
This step of the calculation results in total insurance related
costs to be absorbed by all FICUs of $257.29 million.\53\ See Table 9.
---------------------------------------------------------------------------
\53\ Budgeted amounts are used to calculate the OTR; however,
the OTR is applied to actual expenses incurred each month.
Table 9--NCUSIF Costs
[millions]
------------------------------------------------------------------------
------------------------------------------------------------------------
2016 NCUA Operating Budget..... $290.92
Non-Insurance Related Costs.... -35.19 Table 6.
Direct Operational Charges to +1.56 Budgeted costs for SSA
NCUSIF. training, travel, and
equipment.
----------------
Total 2016 Budgeted 257.29
Insurance Related Costs.
------------------------------------------------------------------------
e. Allocation of Insurance Costs
This step of the OTR methodology is designed to calculate the total
cost of providing share insurance, including work currently performed
by SSAs, and then allocate these costs on an insured shares basis
between FCUs and FISCUs. The steps in the OTR methodology thus far have
determined the total budgeted operating costs and direct charges
applicable to NCUA's role as insurer to be absorbed by all FICUs,
$257.29 million. During the revision to the OTR methodology in 2003,
the agency concluded it is appropriate to recognize NCUA relies on
SSAs, to the fullest extent possible, to perform insurance related
supervision of FISCUs. The cost NCUA, and thus the NCUSIF, avoids \54\
should be taken into account when determining and allocating the total
cost of providing NCUSIF insurance. The calculation of this imputed SSA
value is a multi-step process outlined in Section IV.g, SSA Imputed
Value. In 2016, the SSA imputed value is $40.6 million.
---------------------------------------------------------------------------
\54\ NCUA relies on SSA examination work. Different SSAs are
funded by various means, such as fees paid by state-chartered credit
unions or through general state tax revenues.
---------------------------------------------------------------------------
The OTR methodology also considers that the most fair and
appropriate basis to allocate the cost of providing NCUSIF insurance
between FCUs and FISCUs is the distribution of insured shares. This is
consistent with the mutual nature of the insurance provided by the
NCUSIF, and the statutory allocation method for any NCUSIF premiums and
dividends.
Section IV.d, Calculation of Insurance and Non-Insurance NCUSIF
Costs, determined NCUA's cost to fulfill its role as insurer is $257.29
million. However, the value provided by NCUA's reliance on SSA work
should be factored in to determine the total cost to the federally
insured credit union system of providing NCUSIF insurance. To do this,
the imputed value of the insurance related work performed by the SSAs
($40.60 million) \55\ is added to the total budgeted insurance related
costs ($257.29 million):
---------------------------------------------------------------------------
\55\ The calculation of the SSA imputed value is discuss in
detail in Section IV.g.
Table 10--Total Cost of Providing NCUSIF Insurance
[millions]
------------------------------------------------------------------------
------------------------------------------------------------------------
Total 2016 Budgeted Insurance $257.29 Table 9.
Related Costs.
SSA Imputed Value.............. + $40.60 Value NCUA places on
worked performed by
SSAs. Table 32.
----------------
Total Cost of Providing $297.89
NCUSIF Insurance.
------------------------------------------------------------------------
[[Page 4818]]
The total cost of providing NCUSIF insurance must be allocated
between FCUs and FISCUs. As mentioned, the allocation is based on their
respective proportions of insured shares. FCUs and FISCUs represent
52.3 percent and 47.7 percent,\56\ respectively, of the $935 billion in
NCUSIF insured shares as of June 30, 2015. Thus, the distribution of
costs is as follows:
---------------------------------------------------------------------------
\56\ Based on insured shares reported on NCUA's 5300 Call Report
as of June 30, 2015.
Table 11--Allocation of Total Costs of Providing NCUSIF Insurance
----------------------------------------------------------------------------------------------------------------
FCUs FISCUs
----------------------------------------------------------------------------------------------------------------
Total Cost of Providing NCUSIF Insurance $297.89 Table 10.
(millions).
--------------------------------
Proportion of insured shares................. x 52.3% x 47.7%
Allocated total insurance costs (millions)... $155.80 $142.09
----------------------------------------------------------------------------------------------------------------
FISCUs are responsible for $142.09 million of the total costs of
providing NCUSIF insurance. However, SSAs are providing $40.6 million
worth of imputed value toward the cost of providing NCUSIF share
insurance. Therefore, FISCUs are responsible for absorbing only $101.49
million of the total insurance costs:
Table 12--Net Cost of NCUSIF Insurance for FISCUs
[millions]
------------------------------------------------------------------------
------------------------------------------------------------------------
FISCU portion of total $142.09 Table 11.
insurance costs.
SSA Imputed Value............. - $40.60 Table 32.
-------------------
Net Cost of NCUSIF $101.49
Insurance for FISCUs.
------------------------------------------------------------------------
f. Calculating the OTR
This final step of the OTR methodology computes the OTR as a
percentage of the NCUA Operating Budget. Section IV.e, Allocation of
Insurance and Non-Insurance Costs, determined the net cost of providing
NCUSIF insurance to be absorbed by FISCUs through the OTR is $101.49
million. This amount divided by the percentage of total insured shares
held by FISCUs (47.7 percent) results in the total dollar cost to be
absorbed by the NCUSIF for providing insurance to all federally insured
credit unions. To state it another way, if FISCUs are responsible for
47.7 percent of the cost of providing NCUSIF insurance, and this
represents $101.49 million, then the dollar amount of NCUA costs to be
absorbed by the NCUSIF, through the OTR, must equal $212.78.\57\ See
Table 13.
---------------------------------------------------------------------------
\57\ Mathematically, this computation must be used to arrive at
the total costs (based on budget) to be absorbed by the NCUSIF,
through the OTR, since this amount is the unknown to be solved for
based on the addition of imputed, but not actual, costs to the
budget.
Table 13--Costs To Be Absorbed by the NCUSIF, Through the OTR
------------------------------------------------------------------------
------------------------------------------------------------------------
Net Cost of NCUSIF Insurance $101.49 Table 12.
for FISCUs (millions).
FISCU Proportion.............. / 47.7% Table 11.
-------------------
Costs to be Absorbed by $212.78
the NCUSIF, through the
OTR (millions).
------------------------------------------------------------------------
Now that the dollar amount of the NCUA budget to be absorbed by the
NCUSIF via the OTR has been calculated, the Overhead Transfer Rate
itself, as a percentage of the budget can be calculated. The dollar
amount of the NCUA budget to be absorbed by the NCUSIF ($212.78
million) divided by the total NCUA Budget ($290.92 million) equals the
rate at which actual expenses will be funded by the NCUSIF as they are
incurred each month (73.1 percent). This rate is what is called the
OTR.
Table 14--Overhead Transfer Rate
------------------------------------------------------------------------
------------------------------------------------------------------------
Costs to be Absorbed by the $212.78 Table 13.
NCUSIF, through the OTR
(millions).
NCUA Operating Budget......... / $290.92 Table 9.
Overhead Transfer Rate........ 73.1%
------------------------------------------------------------------------
Table 14 illustrates that 73.1 percent of NCUA's operating
expenses, $212.78 million based on the 2016 budget, are funded by the
NCUSIF via the OTR. The remaining 26.9 percent of NCUA's operating
expenses, $78.14 million based on the 2016 budget, must be funded by
other sources, primarily the FCU Operating Fee.\58\ Thus, the explicit
and implicit distribution of total Operating Budget costs for FCUs and
FISCUs is 65.1 percent and 34.9 percent, respectively.
---------------------------------------------------------------------------
\58\ Other funding sources, in addition to the FCU Operating Fee
(including federal corporate credit union Operating Fees) and fees
collected for various services and publications.
[[Page 4819]]
Table 15--Operating Budget Distribution
------------------------------------------------------------------------
Portion of 2016 operating
budget covered by: FCUs FISCUs
------------------------------------------------------------------------
FCU Operating Fee............. 26.9% 0.0%
OTR x Percent of Insured 38.2% 34.9%
Shares. (73.1% x 52.3%) (73.1% x 47.7%)
-----------------------------------------
Total..................... 65.1% 34.9%
------------------------------------------------------------------------
g. SSA Imputed Value
To develop an OTR that properly reflects the total cost to insured
credit unions of providing NCUSIF insurance, it is necessary to factor
in the value of the insurance related supervision provided by state
examination programs and relied upon by NCUA in managing the NCUSIF.
NCUA developed a four step process to calculate (impute) the value of
the insurance work performed by SSAs that NCUA relies upon. The imputed
value derived from these calculations is factored into the calculation
of the OTR as discussed in Section IV.e.
NCUA determined the best measure available for the value of state
examination programs to the NCUSIF is what it would cost NCUA to
perform this work.\59\ An alternative measure of the value of this work
is the actual cost of SSA supervision programs. However, these do not
necessarily reflect the value to NCUA in managing the NCUSIF \60\ and
are not readily available to NCUA. The Board invites comment on the
methodology for determining the SSA imputed value including proposals
for alternative methods for valuing the insurance work performed by
SSAs in the OTR calculation.
---------------------------------------------------------------------------
\59\ NCUA realizes that the imputed value may be higher or lower
than what SSAs actually spend to conduct insurance related
supervision programs NCUA relies upon. Nonetheless, the relevant
factor for purposes of computing the OTR is the value to the NCUSIF
derived from this work.
\60\ Another consideration is the fact each SSA program may not
represent the same percentage of insurance related supervision of
institutions based on each state's unique program and cost
structure, necessitating separate regulatory and insurance cost
factors be calculated for each state. Such an endeavor would be
costly and would require each SSA to divulge detailed financial and
operating information, which they may not be inclined to provide.
---------------------------------------------------------------------------
Throughout this discussion, we will present the calculations used
to determine the values for the 2016 OTR. In these calculations we use
the following information:
Average exam time based on 2014 actual results,
percentage of exam time used for insurance work based on
the 2015 ETS results, and
budget projections for 2016.
Step 1--NCUA FISCU Workload Projection
The first step in this process is to determine the workload
required for NCUA to examine all FISCUs. To calculate this figure, NCUA
determines the examination hours that field staff expended on FCUs by
asset size and CAMEL rating. The results for 2014 are documented in
Table 16.
Table 16--FCU Average Examination Time (Hours) for 2014
----------------------------------------------------------------------------------------------------------------
Asset range (millions)
-------------------------------------------------------------------------------
<$10 $10-$100 $100-$250 $250-$500 >$500
----------------------------------------------------------------------------------------------------------------
CAMEL 1......................... 39 80 162 192 408
CAMEL 2......................... 41 88 186 234 445
CAMEL 3......................... 45 100 223 279 407
CAMEL 4......................... 65 142 312 225 438
CAMEL 5......................... 109 219 0 0 0
----------------------------------------------------------------------------------------------------------------
NCUA then determines the distribution of FISCUs using the same
asset and CAMEL rating categories. The distribution for 2014 is
documented in Table 17.
Table 17--Number of FISCUs in Each Category
[as of December 2014]
----------------------------------------------------------------------------------------------------------------
Asset range (millions)
-------------------------------------------------------------------------------
<$10 $10-$100 $100-$250 $250-$500 >$500
----------------------------------------------------------------------------------------------------------------
CAMEL 1......................... 54 99 45 30 83
CAMEL 2......................... 342 664 205 102 147
CAMEL 3......................... 188 230 46 16 12
CAMEL 4......................... 40 32 5 2 4
CAMEL 5......................... 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
[[Page 4820]]
The average examination time estimates from Table 16 are then
applied to the distribution of FISCUs in Table 17 using the same asset
and CAMEL rating categories. This provides an estimate of the
examination time needed if NCUA were to conduct all of the state
examination work on the same basis employed for FCUs. Based on the
average examination hours for FCUs and the number of FISCUs in each
asset and CAMEL category, NCUA would have needed 318,573 hours to
complete examinations of all FISCUS in the same manner as it examined
FCUs in 2014. The estimated hours are documented in Table 18.
---------------------------------------------------------------------------
\61\ Numbers may not add up exactly due to rounding.
Table 18--Projected FISCU Exam Hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Asset range (millions)
-----------------------------------------------------------------------------------------------
<$10M $10-$100 $100-$250 $250-$500 >$500 Totals \61\
--------------------------------------------------------------------------------------------------------------------------------------------------------
CAMEL 1................................................. 2,116 7,911 7,295 5,766 33,898 56,986
CAMEL 2................................................. 13,982 58,225 38,232 23,845 65,408 199,692
CAMEL 3................................................. 8,499 22,889 10,256 4,465 4,882 50,992
CAMEL 4................................................. 2,616 4,530 1,558 449 1,750 10,902
CAMEL 5................................................. .............. .............. .............. .............. .............. ..............
-----------------------------------------------------------------------------------------------
Totals.............................................. 27,213 93,555 57,340 34,526 105,938 318,573
--------------------------------------------------------------------------------------------------------------------------------------------------------
Step 2--Allocation of Projected Fiscu Exam Hours
Step 1 calculated that it would take 318,573 hours for NCUA to
conduct examinations in all FISCUs. However, not all examination time
is used to meet NCUA's role as insurer. The ETS results for cycle
ending on May 31, 2015, indicate that 86.83 percent of examination time
was used to meet NCUA's needs in managing risks to the NCUSIF. For
consistency and fairness, this same distribution is applied to FISCUs
when determining the total time it would take NCUA to supervise FISCUs
to meet its role as insurer, resulting in 276,617 hours for insurance
related time. Table 19 illustrates this calculation.
Table 19--Projected FISCU Exam Hours Using ETS
------------------------------------------------------------------------
Hours
------------------------------------------------------------------------
Gross FISCU Exam Hours.................................. 318,573
Times Insurance Factor Based on Exam Survey............. x 86.83%
---------------
Equals Total Insurance Hours........................ = 276,617
------------------------------------------------------------------------
NCUA also estimates total FISCU examination time by multiplying
current NCUA budgeted FISCU examination time \62\ by two. This reflects
that FISCU examinations are conducted jointly with the SSA, and that
all NCUA examination time is for insurance purposes. Table 20 documents
this calculation.
---------------------------------------------------------------------------
\62\ From the 2016 NCUA Workload Budget.
Table 20--Projected FISCU Exam Hours Using Multiplier
------------------------------------------------------------------------
Hours
------------------------------------------------------------------------
Current Budgeted FISCU Insurance Hours.................. 149,914
Times 2 (Assuming Joint Examinations and 50/50 time x 2
split with SSA)........................................
---------------
Equals Projected Examination Insurance Hours for = 299,828
State Program......................................
------------------------------------------------------------------------
The result of the calculation in Table 20 is compared to the result
from Table 19 and the greater of the two numbers is selected, in this
case 299,828 hours, from Table 20. Using the greater of the two results
benefits the SSA imputed value as it requires more resources and,
therefore, increases the imputed value.
Next, NCUA takes the results from the previous step and subtracts
the current budgeted state examination program hours since they are
already included in the resource budget. NCUA also makes an adjustment
for additional FISCU supervision hours. NCUA's 2016 workload program
budgets 25,808 hours for FISCU supervision. Since supervision is
typically performed jointly with SSAs, NCUA would need an additional
25,808 hours. The result is the number of additional insurance hours
necessary for NCUA to examine and supervise all FISCUs without any SSA
assistance. The calculation for the 2016 OTR indicates NCUA would need
an additional 175,722 hours to complete all the FISCU work. The
calculation is illustrated in Table 21.
[[Page 4821]]
Table 21--Additional Hours for FISCU Insurance Work
------------------------------------------------------------------------
Hours
------------------------------------------------------------------------
Projected FISCU Insurance Hours......................... 299,828
Less Current Budgeted FISCU Examination Hours........... - 149,914
Plus Additional FISCU Supervision Hours................. + 25,808
---------------
Equals Total Additional FISCU Insurance Hours....... = 175,722
------------------------------------------------------------------------
Finally, NCUA deducts the time budgeted for FISCU examination
report reviews to arrive at the net additional insurance hours needed
to complete all FISCU examinations and supervision.\63\ The FISCU
examination report review time would no longer be needed if NCUA
performed the FISCU examinations. NCUA's 2016 workload budget contained
5,231 hours for FISCU examination report review. Deducting those hours
from the results from Table 21 results in net additional insurance
hours of 170,401. This calculation is illustrated in Table 22.
---------------------------------------------------------------------------
\63\ As part of its fiduciary responsibility, NCUA examiners
review all state examination reports. This time is assigned to work
classification code 26.
Table 22--Net Additional Hours for FISCU Insurance Work
------------------------------------------------------------------------
Hours
------------------------------------------------------------------------
Total Additional FISCU Insurance Hours.................. 175,722
Less Current Budgeted FISCU Examination Review Hours.... - 5,321
---------------
Equals Net Additional FISCU Insurance Hours......... = 170,401
------------------------------------------------------------------------
Step 3--Projected Additional Staff Required
The next step in the calculation is to determine how many
additional full-time equivalent (FTE) examiners are needed to complete
the net additional FISCU insurance hours calculated in Step 2. To
accomplish this, NCUA first calculates the total annual productive work
hours for an FTE examiner. Total Core and Special Workload hours from
the Workload Budget must be divided by Total Estimated Workload Hours
to determine the productivity ratio.\64\ The productivity ratio for
2016 is 52.7 percent. The productivity ratio calculation is illustrated
in Table 23.
---------------------------------------------------------------------------
\64\ Total workload hours include various leave benefits,
training, and administrative time.
Table 23--Examiner Productivity Ratio
------------------------------------------------------------------------
------------------------------------------------------------------------
Budgeted Core and Special Workload Program Hours........ 764,193
Divided by Total Budgeted Workload Program Hours........ / 1,448,716
---------------
Equals the Productivity Ratio....................... 52.7%
------------------------------------------------------------------------
Applying the productivity ratio to the total annual work hours for
an examiner FTE results in the number of productive hours per year for
each examiner. The budgeted productive hours for an examiner for 2016
is 1,097. This calculation is illustrated in Table 24.
Table 24--Productive Hours per FTE
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Annual Work Hours per examiner FTE................ 2,080
Times the Productivity Ratio............................ x 52.7%
---------------
Equals Annual Productive Hours per examiner FTE..... = 1,097
------------------------------------------------------------------------
The additional number of examiner FTEs necessary to complete the
net additional FISCU insurance work is calculated by dividing the net
additional FISCU insurance hours from Table 22 in Step 2 by the annual
productive hours per FTE. The 2016 OTR calculation resulted in 155.3
additional examiner FTEs needed to complete the additional insurance
work in FISCUs. Table 25 illustrates this calculation.
Table 25--Examiner FTEs Needed for Additional FISCU Work
------------------------------------------------------------------------
------------------------------------------------------------------------
Net Additional FISCU Insurance Hours.................... 170,401
Divided by Annual Productive Hours per FTE.............. / 1,097
---------------
Equals Additional Examiner FTEs Needed.............. = 155.3
------------------------------------------------------------------------
[[Page 4822]]
Adding an additional 155.3 examiners would necessitate additional
staffing in other areas, including additional Supervisory Examiners and
Regional Office staff. Based on NCUA's staffing patterns and
organizational structure, the following ratios of examiners to other
regional positions were used to determine additional staffing needs and
costs. The ratios are documented in Table 26.
Table 26--Other Regional FTEs Needed
------------------------------------------------------------------------
Ratio
Additional staff needed examiners to FTEs per
position position
------------------------------------------------------------------------
Examiners............................... 1/1 155.3
Supervisory Examiners................... 1/9 17.3
Regional Office Analysts................ 1/15 10.4
Regional Office Directors............... 1/25 6.2
Other Regional Support Staff............ 1/20 7.8
-------------------------------
Total Number of Additional Regional .............. 196.9
FTEs Needed........................
------------------------------------------------------------------------
Step 4--Dollar Amount of the SSA Imputed Value
The next step is to calculate the dollar amount of the SSA imputed
value. The first step in this process is to calculate the average cost
per regional FTE. The average cost is based on the actual budget for
regional offices and field staff and includes employee pay and
benefits, travel, rent, communications, utilities, administrative, and
contracted services. The average cost of a regional FTE for the 2016
OTR calculation was $185,508 based on 838.2 FTEs. The calculation is
illustrated in Table 27.
Table 27--Annual Cost per Regional FTE
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Cost of Regions (2016 budget)..................... $155,492,604
Divided by FTEs in Regions (2016 budget)................ / 838.2
---------------
Equals Annual Cost Per Regional FTE................. = $185,508
------------------------------------------------------------------------
Next, NCUA applies the annual cost per regional FTE to the total
number of additional FTEs necessary if NCUA were to complete all FISCU
examinations and supervision. In Table 26, NCUA calculated the total
number of regional FTEs to be 196.9 for 2016. Multiplying the
additional FTEs by the average projected cost per FTE results in
additional regional costs of $36,525,336 for 2016. Table 28 illustrates
this calculation.
Table 28--Total Additional Regional Cost
------------------------------------------------------------------------
------------------------------------------------------------------------
Projected Average Cost per FTE for 2016................. $185,508
Times Additional FTEs Needed............................ x 196.9
---------------
Equals Total Additional Regional Cost............... = $36,525,336
------------------------------------------------------------------------
The additional regional staffing would also have an impact on the
workload of the following NCUA central offices:
Office of Human Resources,
Office of the Chief Financial Officer Division of
Financial Control, and
Office of the Chief Information Officer Division of IT
Operations.
Adding 196.6 additional staff members to NCUA would represent a
15.6 percent increase in staffing. This percentage increase is
calculated by dividing the number of additional regional FTEs by NCUA's
existing number of FTEs, which was 1,260.2 for the 2016 OTR
calculation. Table 29 illustrates the calculation.
Table 29--Percentage Increase in FTEs
------------------------------------------------------------------------
Office Budget
------------------------------------------------------------------------
Additional FTEs Needed.................................. 196.9
Divided by Current Number of FTEs....................... / 1,260.2
---------------
Equals the Percentage Increase in FTEs.............. = 15.6%
------------------------------------------------------------------------
The workload will increase for the central offices indicated above,
as these offices directly support staff by processing personnel
actions, providing computer support, and processing payroll and travel
vouchers.\65\ Therefore, NCUA applies the 15.6 percent increase to each
of the above office's budget to account for additional
[[Page 4823]]
resources and workload. The combined budgets for these three offices
for 2016 was $36,064,124. The projected increase in cost for 2016 based
on the 15.6 percent increase was $5,634,664. The calculations are shown
in Table 30.
---------------------------------------------------------------------------
\65\ Other central offices are considered sufficiently scalable
or not directly impacted to absorb such an increase in regional
positions without needing additional staff.
Table 30--Additional Central Office Costs
------------------------------------------------------------------------
Office Budget
------------------------------------------------------------------------
Office of Human Resources............................... $15,547,400
Plus Office of the Chief Financial Officer Division of + $7,956,891
Financial Control......................................
Plus Office of the Chief Information Officer Division of + $12,559,833
IT Operations..........................................
---------------
Equals Total Other Office Budgets Affected.......... = $36,064,124
Times 15.6 percent...................................... x 15.6%
---------------
Equals Additional Central Office Costs.............. = $5,634,664
------------------------------------------------------------------------
In addition to the increases in certain costs, there would be some
areas of savings to NCUA if it conducted all of the insurance related
FISCU work. There would be no need to pay for the training of state
examiners, or provide SSAs with computers and other equipment. The cost
savings projected for the 2016 OTR calculation was $1,562,408. Table
31shows the breakdown of the cost savings.
Table 31--Total Cost Savings
------------------------------------------------------------------------
------------------------------------------------------------------------
SSA Training and Travel................................. $1,400,000
Plus SSA Computer Leases................................ + $162,408
---------------
Equals Total Cost Savings........................... = $1,562,408
------------------------------------------------------------------------
The SSA imputed value is calculated by adding the additional
regional and central office costs from Table 28 and 30 and then
subtracting the cost savings from Table 31. The SSA imputed value for
the 2016 OTR is $40,597,592. Table 32 illustrates the calculation.
Table 32--SSA Imputed Value
------------------------------------------------------------------------
Additional cost area Cost
------------------------------------------------------------------------
Additional Regional Costs............................... $36,525,336
Plus Additional Central Office Costs.................... + $5,634,664
Less SSA Training and Equipment Cost.................... - $1,562,408
---------------
Equals Imputed SSA Value............................ = $40,597,592
------------------------------------------------------------------------
The SSA Imputed Value of $40.6 million is used to determine the
total costs to NCUA of providing NCUSIF insurance (Table 10) and to
determine the net cost of NCUSIF insurance for FISCUs (Table 12). As
previously discussed in Section IV.e, Allocation of Insurance and Non-
Insurance Costs, NCUA includes the SSA Imputed Value in the OTR
calculation to account for NCUA's reliance, to the fullest extent
possible, on SSAs to perform much of the insurance related supervision
of FISCUs. Therefore, the costs NCUA and thereby the NCUSIF avoid are
taken into account when determining and allocating the total cost of
providing NCUSIF insurance.
V. Request For Comment
The Board invites comments on all issues discussed in this
document. In particular, the Board solicits specific comments on the
OTR's allocation of insurance and non-insurance related activities to
the Operating Budget and the methodology used to determine the value of
the work performed in FISCUs by SSAs. Further, commenters should not
feel constrained to limit their comments to the issues discussed above.
Rather, commenters are encouraged to discuss any other relevant OTR
issues they believe NCUA should consider. Commenters are encouraged to
provide documentation to support any alternatives they may suggest to
adjust the existing methodology or components therein.
By the National Credit Union Administration Board on January 21,
2016.
Gerard Poliquin,
Secretary of the Board.
VI. Appendix A--Mapping of NCUA Regulations
In its January 20, 2011, Overhead Transfer Rate Review,
PricewaterhouseCoopers recommended that NCUA consider steps aimed at
making the OTR methodology more transparent, along with all of the
assumptions and steps that are utilized. In response, NCUA modified
the classification of insurance and non-insurance related activities
in May 2011 for the 2011-2012 ETS by establishing Insurance Related
Activities, Insurance Regulatory Related Activities and Consumer
Regulatory Related Activities. These definitions are mapped to the
NCUA Regulations and were distributed to ETS participants as part of
the ETS Instructions. The mapping of regulations deemed part of the
examination process and distributed to the time study participants
for the ETS period covering June 1, 2014 to May 31, 2015, is
provided below. Footnotes have been added to provide additional
insight. The current mapping has not yet been updated for NCUA's
most recent final rules. Similar to other activities not explicitly
classified in the ETS instructions, ETS participants defer to the
overarching definitions of insurance and non-insurance related
activities provided in the ETS instructions (see Appendix B) to
appropriately allocate time as insurance or non-insurance.
[[Page 4824]]
----------------------------------------------------------------------------------------------------------------
Non-insurance
Insurance and consumer
NCUA Regulation Part regulatory regulatory Description
related related
----------------------------------------------------------------------------------------------------------------
Sec. Part 701--Organization .1--Federal credit ............... X This part addresses
and Operations of FCUs \66\. union chartering, the location of
field of membership NCUA's chartering and
modifications, and field of membership
conversions. policies
.2--Federal Credit ............... X Requires FCU's to
Union Bylaws. operate in accordance
with their approved
bylaws.
.3--Member inspection ............... X This part grants a
of credit union group of members the
books, records, and right to inspect the
minutes. books and records of
an FCU.
.4-.5--Reserved.......
.6--Fees paid by ............... X This section
federal credit unions. establishes the fees
to be paid by the
credit union to the
NCUA.
.7-.13--Reserved......
.14--Change in X ............... This section
official or senior establishes
executive officer in parameters under
credit unions that which a newly
are newly chartered chartered credit
or are in troubled union or a troubled
condition. credit union must
operate with regard
to management
decisions and
operations.
.15-.18--Reserved.....
.19--Benefits for X ............... This section allows a
employees of federal FCU to pay employees
credit unions. certain benefits as
part of their
employment with the
FCU.
.20--Suretyship and X ............... This section
guaranty. establishes the
ability of a FCU to
enter into suretyship
and guaranty
agreements under
certain conditions
and limitations.
.21--Loans to members X ............... This section
and lines of credit establishes the
to members. parameters for a
FCU's overall lending
program.
.22--Loan X ............... This section
participation. establishes the
ability of an FCU to
enter into loan
participation
agreements, and
establishes
limitations and
parameters under
which an FCU can do
so.
.23--Purchase, sale, X ............... This section of the
and pledge of regulation
eligible obligations. establishes the
ability of an FCU to
purchase, sell, or
pledge eligible
obligations (loans)
of the FCU.
.24--Refund of X ............... This section of the
interest. regulations
authorizes an FCU to
refund interest to
members under certain
conditions.
.25--Charitable X ............... This sections grants
contributions and authority of an FCU
donations. to make charitable
contributions.
.26--Credit union X ............... This sections grants
service contracts. authority for an FCU
to enter into service
contracts with other
FCUs.
.27-.29--Reserved.....
.30--Services for ............... X This section grants
nonmembers within the authority to FCUs to
field of membership. provide limited
services to non-
members within their
field of membership.
.31--Nondiscrimination ............... X This section prohibits
requirements. an FCU from
discriminating
against a person or
group of persons and
establishes
parameters under
which it must operate
to ensure non-
discrimination and
notify others of its
non-discrimination
policies.
.32--Payment on shares X ............... This section grants
by public units and permission to FCUs to
nonmembers. receive payments on
shares from public
units.
.33--Reimbursement, X ............... This section
insurance, and establishes the
indemnification of parameters under
officials and which an FCU may
employees. compensate officials,
and volunteers.
.34--Designation of X ............... Grants permission to
low-income status; LICU's to accept
acceptance of secondary capital
secondary capital accounts.\67\
accounts by low-
income designated
credit unions.
.35--Share, share ............... X Regulation grants
draft, and share permission for credit
certificate accounts. unions to offer
share, share draft
and certificate
accounts to members.
.36--FCU Ownership of X ............... Sets parameters and
fixed assets. limitations on a
FCU's ownership and
treatment of fixed
assets
37--Treasury Tax and X ............... Grants permission for
Loan Depositaries; FCU's to act as
Depositaries and Treasury tax and loan
Financial Agents of depositary as well as
the Government. a depositary of
public money.
.38--Borrowed funds ............... X Grants permission for
from natural persons. FCU's to borrow funds
from natural persons.
.39--Statutory lien... ............... X Grants permission to
an FCU to establish a
lien against the
property of members
to secure a financial
obligation to the FCU
by that member.
[[Page 4825]]
Sec. 702--Prompt Corrective .1--Authority, ............... ............... This Part of the NCUA
Action \68\. purpose, scope and regulations
other supervisory (including subparts
authority. A, B, C and D) deals
exclusively with
safety and soundness
issues that impact
directly or
indirectly the
financial condition
of the credit union.
.2 Definitions........
Subpart A..................... .101--Measures and X
effective date of net
worth classification.
.102--Statutory net X
worth categories.
.103--Applicability of X
net worth req't.
.104--Risk portfolios X
defined.
.105 Weighted-average X
life of investments.
.106--Standard X
calculation of risk-
based net worth
requirement.
.107--Alternative X
components for
standard calculation.
.108--Risk mitigation X
credit.
Subpart B--Mandatory and .201--Prompt X
Discretionary Supervisory corrective action for
Actions. ``adequately
capitalized'' credit
unions.
.202--Prompt X
corrective action for
``undercapitalized''
credit unions.
.203--Prompt X
corrective action for
``significantly
undercapitalized''
credit unions.
.204--Prompt X
corrective action for
``critically
undercapitalized''
credit unions.
.205--Consultation X
with State officials
on proposed prompt
corrective action.
.206--Net worth X
restoration plans.
Subpart C--Alternative Prompt .301--Scope and
Corrective Action for New definition.
Credit Unions.
.302--Net worth X
categories for new
credit unions.
.303--Prompt X
corrective action for
``adequately
capitalized'' new
credit unions.
.304--Prompt X
corrective action for
``moderately
capitalized,''
``marginally
capitalized'' or
``minimally
capitalized'' new
credit unions.
.305--Prompt X
corrective action for
``uncapitalized'' new
credit unions.
.306--Revised business X
plans for new credit
unions.
.307--Incentives for X
new credit unions.
Subpart--D Reserves........... .401--Reserves........
.402 Full and fair X
disclosure of
financial condition.
.403--Payment of X
dividends.
Sec. 703--Investment and .1--Purpose and scope. ............... ............... This part of NCUAs
Deposit Activities \69\. regulations deal with
investment and
deposit permissions
of FCU's and the
compliance or non-
compliance with this
section impacts
either directly, or
indirectly, the
financial condition
of the credit union.
.2--Definitions.......
.3--Investment X
policies.
.4--Recordkeeping and X
documentation
requirements.
.5--Discretionary X
control over
Investments and
investment advisers
.6--Credit Analysis... X
Sec. 704--Corporate Credit .1--Scope............. ............... ............... This entire part of
Unions \70\. NCUAs regulations
sets parameters on
the financial
operations of
corporate credit
unions. The
compliance or non-
compliance with this
section could impact
directly, or
indirectly, the
financial condition
of the corporate
credit union.
.2--Definitions.......
.3--Corporate Credit X
Union Capital.
.4--Prompt Corrective X
Action.
.5--Investments....... X
.6--Credit Risk X
Management.
.7--Lending........... X
.8--Asset-Liability X
Management.
.9--Liquidity X
Management.
.10--Investment Action X
Plan.
.11--Corporate CUSO's. X
.12--Permissible X
Services.
.13--Board X
Responsibilities.
.14--Representation... X
[[Page 4826]]
.15--Audit X
Requirements.
.16--Contract/Written X
Agreements.
.17--State-chartered X
corporate credit
unions.
.18--Fidelity bond X
coverage.
.19--Disclosure of X
executive
compensation.
.20--Reserved......... X
.21--Enterprise Risk X
Management.
.22--Membership Fees.. X
Sec. 706--Credit Practices .1--Definitions....... ............... ............... This entire section
\71\. protects the member
from unfair or
deceptive acts by an
FCU as well as
compliance with other
federal law designed
to protect the
consumer (member).
.2--Unfair credit ............... X
practices.
.3--Unfair or ............... X
deceptive cosigner
practices.
.4--Late charges...... ............... X
Sec. 707--Truth in Savings .1--Authority, ............... ............... This entire section
\72\. purpose, coverage and protects the member
effect on state laws. from unfair or
deceptive acts by an
FCU as well as
compliance with other
federal law.
.2--Definitions....... ............... X
.3--General disclosure ............... X
requirements.
.4--Account ............... X
disclosures.
.5--Subsequent ............... X
disclosures.
.6--Periodic statement ............... X
disclosures.
.7--Payment of ............... X
dividends.
.8--Advertising....... ............... X
.9--Enforcement and ............... X
record retention.
.10--Reserved.........
.11--Additional ............... X
disclosure
requirements for
overdraft services.
Sec. 712--Credit Union .1--what does this ............... ............... This entire section of
Service Organizations \73\. part cover?. NCUAs regulations
deal with the
structure and
operations of a CUSO.
The compliance or non-
compliance with these
regulations could
have a direct or
indirect impact on
the financial
condition of an FCU.
.2--How much can an X
FCU invest in or loan
to CUSOs, and what
parties may
participate?.
.3--What are the X
characteristics of
and what requirements
apply to CUSOs?.
.4--What must an FCU X
and a CUSO do to
maintain separate
corporate identities?.
.5--What activities X
and services are
preapproved for
CUSOs?.
.6--What activities X
and services and
prohibited for CUSOs?.
.7--Reserved..........
.8--What transaction X
and comp. limits
apply to an FCU and a
CUSO?.
.9--When must an FCU X
comply with this
part?.
.10--How can a state X
supervisory authority
obtain an exemption
for state chartered
credit unions from
compliance with Sec.
712.3(d)(3)?.
Sec. 713--Fidelity Bond and .1--What is the scope ............... ............... This entire section of
Insurance Coverage for of this section?. NCUA's regulations
Federal Credit Unions \74\. requires credit
unions to obtain
fidelity bond
insurance coverage.
This coverage
protects the credit
union from covered
losses and therefore
protects the NCUSIF.
.2--What are the X
responsibilities of a
credit union's board
of directors under
this section?.
.3--What bond coverage X
must a credit union
have?.
.4--What bond forms X
may be used?.
.5--What is the X
required minimum
dollar amount of
coverage?.
.6--What is the X
permissible
deduction?.
.7--May the NCUA Board X
require a credit
union to secure
additional insurance
coverage?.
[[Page 4827]]
Sec. 714--Leasing \75\...... .1--What does this ............... ............... This entire section of
part cover?. NCUAs regulations
deals with the
ability of FCUs to
enter into leasing
agreements and sets
parameters on types
of leases and
limitations on
financial
arrangements. The
compliance or non-
compliance with this
part could have a
direct or indirect
impact on the
financial condition
of the credit union.
.2--What are the X
permissible leasing
arrangements?.
.3--Must you own the X
leased property in an
indirect leasing
arrangement?.
.4--What are the lease X
requirements?.
.5--What is required X
if you rely on an
estimated residual
value greater than
25% of the original
cost of the leased
property?.
.6--Are you required X
to retain salvage
powers over the
leased property?.
.7--What are the X
insurance
requirements
applicable to
leasing?.
.8--Are the early X
payment provisions,
or interest rate
provisions,
applicable in leasing
arrangements?.
.9--Are indirect X
leasing arrangements
subject to the
purchase of eligible
obligation limit?.
.10--What other laws X
must you comply with
when engaged in
leasing?.
Sec. 715--Supervisory .1--Scope of this part ............... ............... This entire section of
Committee Audits and NCUAs regulations
Verifications \76\. deals with the roles
and responsibilities
of the Supervisory
Committee which are
designed to ensure
the safe and sound
operation of an FCU.
.2--Definitions used X
in this part.
.3--General X
responsibilities of
the Supervisory
Committee.
.4--Audit X
responsibility of the
Supervisory Committee.
.5--Audit of Federal X
Credit Unions.
.6--Audit of Federally- X
insured State-
chartered credit
unions.
.7--Supervisory X
Committee audit
alternatives to a
financial statement
audit.
.8--Requirements for X
verification of
accounts and
passbooks.
.9--Assistance from X
outside, compensated
person.
.10--Audit report and X
working paper
maintenance and
access.
.11--Sanctions for X
failure to comply
with this part.
.12--Statutory audit X
remedies for Federal
credit unions.
Sec. 716--Privacy of 1. Purpose and scope.. ............... ............... This entire section of
Consumer Financial NCUA's regulations
Information \77\. deals with an FCU's
communication with
its members and the
safeguarding of
member information.
.2 Model privacy form
and examples.
.3 Definitions........
Subpart A--Privacy and Opt Out .4--Initial privacy ............... X
Notices. notice to consumers
required.
.5 Annual privacy ............... X
notices to members
required.
.6 Information to be ............... X
included in privacy
notices.
.7--Form of opt out ............... X
notice to consumers
and opt out methods.
.8--Revised privacy ............... X
notices.
.9--Delivering privacy ............... X
and opt out notices.
Subpart B--Limits on .10--Limits on ............... X
Disclosures. disclosure of
nonpublic information
to third parties.
.11--Limits on re- ............... X
disclosure and reuse
of information.
.12--Limits on sharing ............... X
of account number
information for
marketing purposes.
Subpart C--Exceptions......... .13--Exception to opt ............... X
out requirements for
service providers and
joint marketing.
.14--Exceptions to ............... X
notice and opt out
requirements for
processing
transactions.
[[Page 4828]]
.15--Other exceptions ............... X
to notice and opt out
requirements.
Subpart D--Relation to Other .16--Protection of ............... X
Laws; Effective Date. Fair Credit Reporting
Act.
.17--Relation to state ............... X
laws.
.18--Effective date; ............... X
transition rule.
Sec. 717--Fair Credit .1 Purpose, scope and ............... ............... This entire section of
Reporting \78\. effective dates.. NCUAs regulations,
including Subparts A
through I, deals with
the implementation of
the Fair Credit
Reporting Act which
is designed to
protect consumers
(members) from unfair
or deceptive
practices.
.2--Examples..........
.3--Definitions.......
Subpart B..................... Reserved..............
Subpart C--Affiliate Marketing .20--Coverage and ............... X
definitions.
.21--Affiliate ............... X
marketing opt-out and
exceptions.
.22--Scope and ............... X
duration of opt-out.
.23--Contents of opt- ............... X
out notice;
consolidated and
equivalent notices.
.24--Reasonable ............... X
opportunity to opt-
out.
.25--Reasonable and ............... X
simple methods of
opting out.
.26--Delivery of opt- ............... X
out notices.
.27--Renewal of opt- ............... X
out.
28--Effective date, ............... X
compliance date, and
prospective
application.
Subpart D--Medical Information .30--Obtaining or ............... X
using medical
information in
connection with a
determination of
eligibility for
credit.
.31--Limits on re- ............... X
disclosure of
information.
.32--Sharing medical ............... X
information with
affiliates.
Subpart E--Duties of .40--Scope............
Furnishers of Information.
.41--Definitions......
.42--Reasonable ............... X
policies and
procedures concerning
the accuracy and
integrity of
furnished information.
.43--Direct Disputes.. ............... X
Subparts F-H.................. Reserved..............
Subpart I--Duties of Users of .80-.81 Reserved......
Consumer Reports Regarding
Address Discrepancies and
Records Disposal.
.82--Duties of users ............... X
regarding address
discrepancies..
.83--Disposal of ............... X
consumer information.
.84-.89 Reserved......
.90--Duties regarding ............... X
the detection,
prevention, and
mitigation of
identity theft..
.91--Duties of card ............... X
issuers regarding
changes of address.
Sec. 722--Appraisals \79\... .1--Authority, Scope ............... ............... This entire section of
and Purpose. NCUAs regulations
establishes rules for
obtaining appraisals
on collateral
securing financial
obligations of
members. The
compliance or non-
compliance with this
section could have a
direct or indirect
impact on the
financial standing of
the credit union.
.2--Definitions.......
.3--Appraisals X
required;
transactions
requiring a State
certified or licensed
appraiser.
.4--Minimum appraisal X
standards.
.5--Appraiser X
Independence.
.6--Professional X
association
membership;
competency.
.7--Enforcement....... X
Sec. 723--Member Business 1.--What is a member ............... ............... This entire section of
Loans \80\. business loan?. NCUAs regulations
establishes
parameters under
which an FCU must act
in the creation,
implementation and
monitoring of a
member business
lending program,
including:
underwriting
guidelines, loan
limitations and loan
types. The compliance
or non-compliance
with this part could
impact the financial
condition of an FCU.
2.--What are
prohibited
activities?.
[[Page 4829]]
.3--What are the X
requirements for
construction and
development lending?.
.4--What other X
regulations apply to
member business
lending?.
.5--How do you X
implement a member
business loan
program?.
.6--What must your X
member business loan
policy address?.
.7--What are the X
collateral and
security
requirements?.
.8--How much may one X
member or a group of
associated members
borrow?.
.9--Reserved..........
.10--What waivers are X
available?.
.11--How do you obtain X
a waiver?.
.12--What will NCUA do X
with my waiver
request?.
.13--What options are X
available if the NCUA
Regional Director
denies my waiver
request, or a portion
of it?.
.14--.15--Reserved....
.16--What is the X
aggregate member
business loan limit
for a credit union?.
.17--Are there X
exceptions to the
aggregate loan limit?.
.18--How do I obtain X
an exception?.
.19--What are the X
recordkeeping
requirements?.
.20--How can a state X
supervisory authority
develop and enforce a
member business loan
regulation?.
.21--Definitions......
Sec. 740--Accuracy of .0--Scope............. ............... ............... This entire section of
Advertising and Notice of NCUA regulations
Insured Status \81\. requires federally
insured credit unions
to display signage in
facilities and in
advertising notifying
members that deposits
are insured by NCUA.
.1--Definitions.......
.2--Accuracy of X
advertising.
.3--Advertising of X
excess insurance.
.4 Requirements for X
the official sign.
.5--Requirements for X
the official
advertising statement.
Sec. 741--Requirements for 0--Scope..............
Insurance \82\.
Subpart A--Regulations That .1--Examination....... ............... ............... This section, subpart
Apply to Both Federal Credit A of Part 741, of
Unions and Federally Insured NCUAs regulations
State-Chartered Credit Unions governs certain
and That Are Not Codified actions by FCUs as
Elsewhere in NCUA's well as FISCUs that
Regulations. relate directly to
their insurance
coverage under the
NCUSIF.
.2--Maximum borrowing X
authority.
.3--Criteria.......... X
.4--Insurance premium X
one percent deposit.
.5--Notice of X
termination of excess
insurance coverage..
.6--Financial and X
statistical and other
reports.
.7--Conversion to a X
state-chartered
credit union.
.8--Purchase of assets X
and assumption of
liabilities.
.9 -Uninsured X
membership shares.
.10--Disclosure of X
share insurance.
.11--Foreign branching X
Subpart--B--Regulations
Codified Elsewhere in NCUA's
Regulations as Applying to
Federal Credit Unions That
Also Apply to Federally
Insured Stated-Chartered
Credit Unions.
.201--Minimum fidelity X ............... This section requires
bond requirements. any credit union
applying for
insurance under the
NCUSIF to obtain
fidelity bond
coverage. Failure to
obtain and maintain
bond coverage could
impact the credit
unions financial
condition.
[[Page 4830]]
.202--Audit and X ............... This section requires
verification a Supervisory
requirements. Committee to make or
cause to be made an
audit of the credit
unions books and
records. Non-
compliance can impact
the credit union's
financial condition.
.203--Minimum loan X ............... This section
policy requirements. establishes certain
requirements for an
FCU's compliance with
parts 723 and 701 of
NCUA regulations, and
exempts FISCUs if the
SSA has adopted their
own rules governing
certain lending
programs/practices.
.204--Maximum public X ............... This section requires
unit and nonmember compliance with part
accounts, and low 701.32 regarding
income designation. acceptance of non-
member deposits.
.205--Reporting X ............... This section required
requirements for newly chartered
credit unions that credit unions in
are newly chartered existence under 2
or in troubled years or credit
condition. unions designated as
in troubled condition
to comply with part
701.14 of the
regulations.
.206--Corporate credit X ............... Requires corporate
unions. credit unions to
comply with part 704
of NCUA regulations.
.207--Community ............... X This part of section
development revolving 741 requires any
loan program for insured credit union
credit unions. to adhere to part 705
of NCUA regulations
governing loans to
LICU's for the
purposes of community
investment.
.208--Mergers of X ............... Requires compliance
federally insured with section 206 of
credit unions; the FCU act and parts
voluntary termination 708a and 708b of the
or conversion of regulation regarding
insured status. termination or
conversion of insured
status.
.209--Management X ............... Prohibits an official
official interlocks. of one credit union
serving as an
official of another,
competing credit
union.
.210--Central X ............... Requires insured
liquidity facility. credit unions to
comply with part 725
of the regulation
governing the
membership of credit
unions in the CLF.
.211--Advertising \83\ X ............... This section of this
part of NCUAs
regulations requires
an insured credit
union to comply with
Part 740 of the
regulations governing
the advertising and
notification of
NCUSIF insurance.
.212--Share insurance. X ............... This section addresses
the insurance of
member accounts as
prescribed in subpart
A of part 745 of the
regulations.
.213--Administrative X ............... This section addresses
actions, adjudicative an insured credit
hearings, rules of unions compliance
practice and with part 747 of the
procedure. regulations.
.214--Report of crime ............... X This section of part
or catastrophic act 741 requires insured
and Bank Secrecy Act credit unions to
compliance. comply with Part 748
a regulation that
deals with consumer
protection.
.215--Records ............... X This section of part
preservation program. 741 requires and
insured credit union
to comply with part
749 of the
regulations which
addresses the
preservation of
credit union records,
including member
information.
.216--Flood insurance. ............... X This section of part
741 requires and
insured credit union
to comply with part
760 of the
regulations which
addresses the
requirement for flood
insurance on real
estate loans where
required for
protection of the
member's property and
credit unions
collateral.
.217--Truth in savings ............... X This section of part
741 requires insured
credit unions to
comply with part 707
of the regulations
which addresses
compliance with the
Truth in Savings act,
as previously
discussed above.
.218--Involuntary X ............... Requires all insured
liquidation and credit unions to
creditor claims. comply with part 709
of the regulation
regarding involuntary
liquidation and
creditor claims
against FCUs.
.219--Investment X ............... Requires compliance of
requirements. all insured credit
unions to comply with
Part 703 of the
regulations. Part 703
is discussed earlier
in this chart.
.220--Privacy of ............... X Requires compliance of
consumer financial all insured credit
information. unions to comply with
part 716 of the
regulation. Part 716
is discussed earlier
in this chart.
[[Page 4831]]
.221 Suretyship and X ............... Requires compliance
guaranty requirements. with Part 701.20 of
NCUA regulations
regarding an FCU
entering into a
suretyship
arrangement, and
limits a FISCUs
ability to enter into
such arrangements to
the applicable state
law.
.222--Credit Union X ............... Requires all insured
Service Organizations. credit unions to
comply with part
712.(d)(3) and 712.4
of NCUA regulations
regarding the
establishment and
operation of CUSOs.
Sec. 745--Share Insurance ...................... ............... ............... This entire section,
and Appendix \84\. including subparts A
and B, addresses
membership accounts
and payments to
members.
Subpart A--Clarification and .0--Scope.............
Definition of Account
Insurance and Coverage.
.1 Definitions........
.2--General principles X
applicable in
determining insurance
of accts.
.3--Single ownership X
accounts.
.4--Revocable trust X
accounts.
.5 Accounts held by X
executors or
administrators.
.6--Accounts held by a X
corporation,
partnership or
unincorporated
association.
.7--Shares accepted in X
a foreign currency.
.8--Joint ownership X
accounts.
.9-1 Trust accounts... X
.9-2 Retirement and X
other employee
benefit plan accounts.
.10--Accounts held by X
government depositors.
.11--Accounts X
evidenced by
negotiable
instruments.
.12--Accounts X
obligations for
payment of items
forwarded for
collection by
depository
institution acting as
agent.
.13--Notification to X
members/shareholders.
Subpart B--Payment of Share .200--General.........
Insurance and Appeals.
.201--Processing of X
insurance claims.
.202--Appeal.......... X
.203 Judicial review.. X
Sec. 748--Security Program, .0--Security program.. ............... ............... This section addresses
Report of Suspected Crimes, the requirement for
Suspicious Transactions, insured credit unions
Catastrophic Acts, and Bank to comply with the
Secrecy Act Compliance \85\. Bank Secrecy Act
(BSA).
.1 Filing of reports.. ............... X
.2--Procedures for ............... X
monitoring Bank
Secrecy Act (BSA)
compliance.
Sec. 749--Records .0--Purpose and Scope. ............... ............... This part addresses
Preservation Program \86\. the requirements of
and best practices of
preserving the
records of the credit
union.
.1--Definitions.......
.2--Vital records X
preservation program.
.3--Vital records X
center.
.4--Format for vital X
records preservation.
.5--Format for records X
required by other
NCUA regulations.
Sec. Part 760--Loans In .1--Authority, Purpose ............... ............... This section deals
Areas Having Special Flood and Scope. with the requirement
Hazards \87\. for flood insurance
where required. The
obtaining of flood
insurance, and proper
determination of the
requirement for flood
insurance, protects
the member's property
and the credit unions
collateral.
.2--Definitions.......
.3--Requirement to ............... X
purchase flood
insurance where
available.
.4--Exemptions........ ............... X
.5 -Escrow Requirement ............... X
.6--Required use of ............... X
standard flood hazard
determination form.
.7--Forced placement ............... X
of flood insurance.
.8--Determination fees ............... X
.9--Notice of special ............... X
flood hazards and
availability of
Federal disaster
relief assistance.
.10--Notice of ............... X
servicer's identity.
----------------------------------------------------------------------------------------------------------------
[[Page 4832]]
---------------------------------------------------------------------------
\66\ Part 701 deals with the organization of FCUs. Portions of
Part 701 deal with safety and soundness and are classified as
Insurance Regulatory Related, other sections are Non-Insurance or
Consumer Regulatory Related. Certain sections are classified as
Insurance Regulatory Related not because the section authorizes the
activity; but rather, the section establishes limitations and other
criteria to ensure the activity is done safely and soundly.
\67\ Aids in meeting the necessary net worth levels under Prompt
Corrective Action.
\68\ Part 702 defines the various statutory levels of net worth
for all federally insured credit unions and the actions required
when credit unions fall below well capitalized per the FCU Act. The
entire Part protects the NCUSIF and is Insurance Regulatory Related.
\69\ Part 703 is designed to provide reasonable controls to
ensure FCUs conduct investing safely and soundly. The entire Part
protects the NCUSIF and is Insurance Regulatory Related.
\70\ Part 704 governs the organization and operations of
corporate credit unions. Corporate credit unions do not have direct
consumer operations and are systemically critical to the FICU
system. The entire Part protects the NCUSIF and is Insurance
Regulatory Related. This section has been updated since the
PricewaterhouseCoopers 2013 report to reflect changes in Part 704.
\71\ Recently Rescinded. Part 706 deals with FCU credit
practices. Portions of 706 are designed to protect consumers from
unfair credit practice while other parts are designed to ensure FCUs
establish appropriate credit exposure limits in relation to their
net worth. The consumer related portions of this Part are classified
as Non-Insurance or Consumer Regulatory Related while those dealing
with FCU safety and soundness are classified as Insurance Regulatory
Related.
\72\ Part 707 is designed to protect FICU members from unfair or
deceptive practices by requiring adequate consumer disclosures. The
entire Part is classified as Non-Insurance or Consumer Regulatory
Related.
\73\ Part 712 deals with CUSOs. The rule sets requirements for
the legal structures and approved and prohibited activities. Since a
poorly organized or operationally unsound CUSO can have a negative
impact on a FICUs' net worth, the entire Part protects the NCUSIF
and is classified as Insurance Regulatory Related.
\74\ Part 713 governs establishes the requirements for credit
union bond and insurance coverage. Bond and insurance coverage
protects credit unions from losses. The entire rule is classified as
Insurance Regulatory Related.
\75\ Part 714 governs FCU authority to enter into lease
agreements and sets requirements designed to protect FCUs from
losses associated with leasing activities. The entire Part is
classified as Insurance Regulatory Related.
\76\ Part 715 establishes the roles and responsibilities of the
Supervisory Committee. Since the Supervisory Committee performs an
oversight and control function related to safety and soundness, the
entire Part is classified as Insurance Regulatory Related.
\77\ Part 716 deals exclusively with the safeguarding of member
information and the entire Part is classified as Non-Insurance and
Consumer Regulatory Related.
\78\ Part 717 deals exclusively with the Fair Credit Reporting
Act which is designed to protect members from unfair or deceptive
reporting practices. The entire Part is classified as Non-Insurance
and Consumer Regulatory Related.
\79\ Part 722 establishes requirements for obtaining appraisals
securing financial obligations of members. Sufficiently valued
collateral can mitigate losses associated with secured loans and
protects the credit union and thereby the NCUSIF from losses. The
entire Part is categorized as Insurance Regulatory Related.
\80\ Part 723 establishes the requirements and restrictions for
FICU member business lending. This section is designed to promote
safe and sound underwriting of business loans and establish
reasonable concentration risk limits. This entire Part protects
FICUs and the NCUSIF from losses and is classified as Insurance
Regulatory Related.
\81\ Part 740 establishes the requirement for federally insured
credit unions to properly disclose that deposits are federally
insured. This entire Part is classified as Insurance Regulatory
Related.
\82\ Part 741 establishes the requirements for obtaining and
keeping NCUSIF insurance coverage. Certain sections of this Part are
designed to promote safety and soundness and are categorized as
Insurance Regulatory Related while other sections deal with
requirements for the benefit of members and are categorized as Non-
Insurance and Consumer Regulatory Related.
\83\ In practice, section 741.211 is classified as Insurance
Regulatory Related since it both invokes Part 740, which itself is
Insurance Regulatory Related, and it relates to requirements for
FISCUs. Previous ETS instructions contained a clerical error
classifying section 741.211 as Non-Insurance and Consumer Regulatory
Related. However, since section 741.211 is applicable only to FISCUs
and the ETS only samples FCUs, the results of the ETS and OTR were
not affected. The classification of section 741.211 has been updated
here and will be reflected this way during the next ETS instruction.
\84\ Part 745 defines insurance coverage by account type and
establishes priority during payout. In practice, Part 745 is
classified as Insurance Regulatory Related as it relates to the
insurability of accounts. Previous ETS instructions contained a
clerical error classifying Part 745 as Non-Insurance and Consumer
Regulatory Related. AMAC and OCP primarily execute Part 745 as it
relates to NCUA's payout function and consumer inquiries regarding
insurance coverage. Part 745 is captured in the Financial Budget
section of the OTR calculation through AMAC's and OCP's financial
budgets, with 100 percent and 17.7 percent of the respective budgets
allocated to insurance-related activities. Thus, the actual OTR
calculation was not affected by the clerical error in the
instructions. The classification of Part 745 has been updated here
and will be reflected this way during the next ETS instruction.
\85\ Part 748 deals with required regulatory reporting designed
to protect members. The entire Part is categorized as Non-insurance
and Consumer Regulatory Related.
\86\ Part 749 deals with the preservation of vital FICU records
necessary for ongoing operations. Failure to properly protect
records could jeopardize the viability of an insured credit union
and the insurance coverage of member accounts. This entire Part is
categorized as Insurance Regulatory Related.
\87\ Part 760 is designed to protect member's property and the
entire section is categorized as Non-Insurance and Consumer
Regulatory Related.
---------------------------------------------------------------------------
VII. Appendix B--Examination Time Survey Instructions
NCUA issues instructions to participants in the ETS prior to the
start of each ETS cycle. Training for participants is also provided
to ensure time spent on insurance and non-insurance related
activities is captured accurately and consistently. Below is the
version of instructions distributed to participants prior to the
June 1, 2015 through May 31, 2016 ETS cycle.
Examination Time Survey
I. General Definitions
A. Rules and Regs Classification
II. Specific Instructions About Individual Scope Categories
A. Planning/Scope Development
B. Call Report Review
C. Supervisory Committee Review
D. Financial Analysis
E. Loan Analysis
F. Investment Analysis
G. Liquidity Analysis
H. Asset Liability Management
I. Compliance
J. Information Systems Technology
K. Management Analysis
L. Contact Report/Joint Conference/Follow-Up Procedures
I. General Definitions
Insurance Related Examination Procedures
Insurance Related examination or supervision contact procedures
address safety and soundness issues. On the time survey forms,
respondents should classify the time used to evaluate safety and
soundness as ``insurance related.'' ``Insurance Related'' time
includes:
Evaluating financial trends and Call Report data
Determining the credit union's solvency position
Evaluating risks, and potential costs, the credit union
presents to the NCUSIF (when appropriate)
Assessing management's efforts to protect earnings and net
worth by identifying, evaluating, controlling, and monitoring
internal and external risks
Assessing management's abilities to develop strong policies
and a reliable internal control structure
Insurance Regulatory Related Examination Procedures
Insurance Regulatory related examination or supervision contact
procedures address regulations that are not designed to protect
consumers directly. This includes assessing compliance with all
regulations outside of consumer oriented regulations--see listing of
consumer regulations in the following section--Consumer Regulatory
examination procedures.
Insurance Regulatory related regulations include those
regulations that address safety and soundness issues. Examples
include (this is not all inclusive):
701.21--Loans to Members and Lines of Credit to Members
[cir] Includes total loan limit to one individual, limitation on
maturity, rate of interest, and security.
702--Prompt Corrective Action
[cir] Establishes net worth categories and mandatory and
discretionary supervisory actions
703--Investments and Deposit Activities
[cir] Establishes permissible investments and requires credit
analysis prior to purchase and requires ongoing monitoring of
securities
712--Credit Union Service Organizations
[cir] Establishes investment and loan limits as well as outlines
permissible activities
713--Fidelity Bond and Insurance Coverage
[cir] Requires minimum bond coverage
715--Supervisory Committee Audits and
[[Page 4833]]
Verifications
722--Appraisals
[cir] Establishes minimum appraisal standards based on loan size
723--Member Business Loans
[cir] Establishes prohibited activities, requires specific
policies and sets overall loan limits as well as limits to one
member or group of associated members
Consumer Regulatory Related Examination Procedures
Consumer Regulatory Related examination or supervision contact
procedures address compliance with consumer regulations. The
regulations include:
Reg. B--Equal Credit Opportunity Act
BSA--Bank Secrecy Act
Reg. C--Home Mortgage Disclosure Act
Reg. CC--Expedited Funds Availability
COPPA--Children's Online Privacy Protection Act
Reg. D--Reserve Requirements
Reg. E--Electronic Funds Transfer Act
FACTA--Fair and Accurate Credit Transactions Act
FCPR--Fair Credit Practice Rule
FCRA--Fair Credit Reporting Act
FDCPA--Fair Debt Collections Practices Act
FDPA--Flood Disaster Protection Act
FHA--Fair Housing Act
GLBA--Gramm-Leach Bliley Act
HOEPA--Home Ownership and Equity Protection Act
HOPA--Home Owner's Protection Act
Reg. M--Consumer Leasing
OFAC--Office of Foreign Asset Control
PCFI--Privacy of Consumer Financial Information
RFPA--Right to Financial Privacy Act
SCRA--Service Members Civil Relief Act
Reg.--X Real Estate Settlement Procedures Act
Credit Card Act
Unlawful Internet Gaming Enforcement Act
SAFE Act--Secure and Fair Enforcement for Mortgage
Licensing Act
Reg.--Z Truth in Lending
Rules and Regulations Part 706--Credit Practices
Rules and Regulations Part 707--Truth in Savings
Rules and Regulations Part 717--Fair Credit Reporting
The chart below will help you determine the appropriate
regulatory category (Insurance Regulatory or Non-Insurance and
Consumer Regulatory) for all regulations. [The chart normally
embedded here is shown as Appendix A in this document].
II. Specific Instructions about Individual Scope Categories
Note: The procedures referenced within each time category of the
survey are not all encompassing. These guidelines merely provide
examples respondents should consider when estimating the allocation
of their time.
A. Planning/Scope Development
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Reviewing prior contact reports to identify historical
safety and soundness concerns;
[cir] Reviewing scope workbook to become familiar with potential
safety and soundness concerns;
[cir] Reviewing correspondence between contacts that address
safety and soundness issues;
[cir] Reviewing recent financial trends;
[cir] Evaluating changes to the credit union's product and
service mix that could present new safety and soundness concerns;
[cir] Determining whether a Subject Matter Examiner could assist
during the supervision process in addressing safety and soundness
concerns;
[cir] Considering whether additional resources (i.e., grants,
technical assistance, low-income designation) are available to
assist management in addressing safety and soundness concerns;
[cir] Evaluating prevailing economic conditions;
[cir] Reviewing risk management reports;
[cir] Interviewing key officials to learn status of action taken
to correct previously identified safety and soundness concerns;
[cir] Developing on-site procedures for evaluating safety and
soundness concerns;
[cir] Completing portions of scope workbook that pertain to
safety and soundness concerns; and
[cir] Updating scope workbook to document new information about
safety and soundness issues.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to Insurance Regulatory compliance such as:
[cir] Reviewing prior contact reports for previously cited
noncompliance and regulatory violations related to Insurance
Regulatory issues;
[cir] Reviewing correspondence between contacts that addresses
Insurance Regulatory concerns;
[cir] Determining the potential applicability of new Insurance
Regulatory requirements;
[cir] Considering whether additional resources (i.e., grants,
technical assistance, low-income designation) are available to
assist management in addressing Insurance Regulatory compliance
concerns;
[cir] Interviewing key officials to determine management's level
of expertise regarding, and attitude toward, Insurance Regulatory
compliance;
[cir] Developing on-site procedures for evaluating Insurance
Regulatory concerns;
[cir] Completing portions of scope workbook that pertain to
Insurance Regulatory concerns; and
[cir] Updating scope workbook to document new information about
Insurance Regulatory issues.
3. Time related to Consumer Regulatory Issues includes the time
for tasks related to consumer regulations such as:
[cir] Reviewing prior contact reports for previously cited
noncompliance issues and regulatory violations related to Consumer
Regulatory issues;
[cir] Reviewing scope workbook to become familiar with potential
Consumer Regulatory concerns;
[cir] Reviewing correspondence between contacts that addresses
Consumer Regulatory concerns;
[cir] Determining the potential applicability of new Consumer
Regulatory requirements;
[cir] Determining whether a Subject Matter Examiner could assist
during the supervision process in addressing Consumer Regulatory
compliance concerns;
[cir] Considering whether additional resources (i.e., grants,
technical assistance, low-income designation) are available to
assist management in addressing Consumer Regulatory compliance
concerns;
[cir] Evaluating changes to the credit union's product and
service mix that could require an expanded review of Consumer
Regulatory compliance;
[cir] Interviewing key officials to determine management's level
of expertise regarding, and attitude toward, Consumer Regulatory
compliance;
[cir] Developing on-site procedures for evaluating Consumer
Regulatory concerns;
[cir] Completing portions of scope workbook that pertain to
Consumer Regulatory concerns; and
[cir] Updating scope workbook to document new information about
Consumer Regulatory issues.
B. Call Report Review
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Determining if factors causing inaccuracies in Call
Reports are symptoms of internal control weaknesses;
[cir] Reviewing Call Report trends for potential risk
indicators;
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to Insurance Regulatory compliance such as:
[cir] Verifying the accuracy and timeliness of Call Reports
filed by management.
3. Time related to Consumer Regulatory Issues while reviewing
the Call Report is not applicable considering no consumer
regulations are addressed in the Call Report.
C. Supervisory Committee Review
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Reviewing general internal controls and segregation of
duties;
[cir] Evaluating if the supervisory committee serves as a
legitimate ``check'' upon management activity; and
[cir] Determining whether supervisory committee is effective in
correcting identified internal control weaknesses.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to Insurance Regulatory compliance such as:
[cir] Ensuring the supervisory committee is carrying out its
fiduciary responsibility to ensure member account verifications and
annual audits are complete and timely and meeting the supervisory
committee's regulatory requirements.
[cir] Reviewing the actual documentation from the supervisory
committee audit and member account verification.
3. Time related to Consumer Regulatory Issues includes the time
for tasks such as:
[cir] Review of follow-up actions related to Consumer Regulatory
violations.
[[Page 4834]]
D. Financial Analysis
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Reviewing the current financial trends; and
[cir] Determining whether management has adequate controls and
risk management systems in place.
2. Time related to Insurance Regulatory Issues includes the time
for tasks such as:
[cir] Reviewing general accounting procedures to ensure
compliance with the Accounting Manual for Federal Credit Unions;
[cir] Verifying that current financial statements reflect the
balances in the general ledger;
[cir] Determining that management is maintaining adequate
subsidiary ledgers; and
[cir] Testing the validity of delinquency computation and income
accrual procedures.
3. Time related to Non-Insurance Issues is not applicable
considering no consumer regulations are addressed during the review
of this area.
E. Loan Analysis
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Reviewing loan underwriting procedures;
[cir] Determining the risk associated with the product mix;
[cir] Evaluating loan policies to determine if sound practices
exist;
[cir] Reviewing collection efforts for timeliness;
[cir] Evaluating whether the level of the credit union's
reserves is consistent with the loan products offered by the credit
union.
[cir] Assessing the controls management has over loan losses.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to compliance with the following regulations:
[cir] 701.21--Loans to Members and Lines of Credit to Members
Assessing
[cir] 702.22--Loan participation
[cir] 722--Appraisals
[cir] 723--Member Business Loans
3. Time related to Consumer Regulatory Issues includes the time
for tasks such as:
[cir] Evaluating compliance with consumer and mortgage
compliance laws and regulations--Refer to listing under General
Definitions; and
[cir] Ensuring the written policies comply with all applicable
lending regulations.
F. Investment Analysis
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Reviewing appropriateness of the investment portfolio and
overall practices;
[cir] Determining the adequacy of the internal controls related
to investments;
[cir] Assessing investment trends;
[cir] Ensuring adequate safekeeping procedures are in place; and
[cir] Evaluating management's effectiveness in addressing
investment risks.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to compliance with the following regulations:
[cir] Reviewing the permissibility of the investments included
in the portfolio--703--Investments and Deposit Activities; and
[cir] Reviewing the written investment policy to ensure the
policy includes all elements discussed in the regulations.
3. Time related to Consumer Regulatory Issues is not applicable
considering no consumer regulations are addressed in the review of
investments.
G. Liquidity Analysis
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Determining whether the credit union has sufficient
liquidity to cash needs for loan and share transactions; and
[cir] Evaluating whether management has sound contingency plans
for addressing unanticipated liquidity needs.
[cir] Ensuring risk management processes (measuring, monitoring,
controlling, and reporting) are appropriate for credit union.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to compliance with the following:
[cir] Ensuring management is complying with statutory borrowing
limitations.
3. Time related to Consumer Regulatory Issues is not applicable
considering no consumer regulations are addressed in the review of
liquidity.
H. Asset Liability Management
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Determining if management has adequate controls in place
and assigns clear responsibilities to address the credit union's
overall exposure to interest rate risk;
[cir] Reviewing the adequacy of the credit union's modeling and
risk monitoring procedures; and
[cir] Ensuring that management initiates corrective action when
internal analysis identifies concerns relative to interest rate
risk.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to compliance with the following:
[cir] Ensuring written asset liability management policies do
not contain provisions that are inconsistent with regulations that
apply to loans, investments, or shares.
3. Time related to Consumer Regulatory Issues is not applicable
considering no consumer regulations are addressed in the review of
asset liability management.
I. Compliance
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Determining whether any identified regulatory violations
could cause the credit union to have financial risk exposure.
2. Time related to Insurance Regulatory Issues includes the time
reviewing compliance with the following regulations:
[cir] 701.21--Loans to Members and Lines of Credit to Members
[cir] 701--Prompt Corrective Action
[cir] 703--Investments and Deposit Activities
[cir] 712--Credit Union Service Organizations
[cir] 713--Fidelity Bond and Insurance Coverage
[cir] 715--Supervisory Committee Audits and Verifications
[cir] 722--Appraisals
[cir] 723--Member Business Loans
3. Time related to Consumer Regulatory Issues includes Assessing
management's compliance with the consumer and mortgage compliance
laws and regulations. This includes:
[cir] Reg. B--Equal Credit Opportunity Act
[cir] BSA--Bank Secrecy Act
[cir] Reg. C--Home Mortgage Disclosure Act
[cir] Reg. CC--Expedited Funds Availability
[cir] COPPA--Children's Online Privacy Protection Act
[cir] Reg. D--Reserve Requirements
[cir] Reg. E--Electronic Funds Transfer Act
[cir] FACTA--Fair and Accurate Credit Transactions Act
[cir] FCPR--Fair Credit Practice Rule
[cir] FCRA--Fair Credit Reporting Act
[cir] FDCPA--Fair Debt Collections Practices Act
[cir] FDPA--Flood Disaster Protection Act
[cir] FHA--Fair Housing Act
[cir] GLBA--Gramm-Leach Bliley Act
[cir] HOEPA--Home Ownership and Equity Protection Act
[cir] HOPA--Home Owner's Protection Act
[cir] Reg. M--Consumer Leasing
[cir] OFAC--Office of Foreign Asset Control
[cir] PCFI--Privacy of Consumer Financial Information
[cir] RFPA--Right to Financial Privacy Act
[cir] SCRA--Service Members Civil Relief Act
[cir] Reg.--X Real Estate Settlement Procedures Act
[cir] Credit Card Act
[cir] Unlawful Internet Gaming Enforcement Act
[cir] SAFE Act--Secure and Fair Enforcement for Mortgage
Licensing Act
[cir] Reg.--Z Truth in Lending
[cir] Rules and Regulations Part 706--Credit Practices
[cir] Rules and Regulations Part 707--Truth in Savings
[cir] Rules and Regulations Part 717--Fair Credit Reporting
J. Information Systems Technology
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Ensuring that the credit union's written policies
contribute toward the establishment and maintenance of a system of
sound internal controls; and
[cir] Determining if weakness in the control structure presents
any exposure to financial risks.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to compliance with the following:
[cir] Ensuring that all agreements with outside parties meet
applicable legal requirements.
3. Time related to Consumer Regulatory Issues includes Assessing
management's compliance with the following consumer regulations:
[cir] Children's Online Privacy Protection Act (COPPA)
[cir] Gramm-Leach-Bliley Act (GLBA) related to guidance on
identity theft.
K. Management Analysis
1. Time related to Insurance Issues includes the time required
for tasks such as:
[[Page 4835]]
[cir] Reviewing planning and general business practices for
overall soundness;
[cir] Reviewing income/expense budget process and controls; and
[cir] Assessing management's capabilities in implementing
strategies to address risks.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to compliance with the following:
[cir] Reviewing compliance with Federal Credit Union Bylaws;
[cir] Reviewing Board minutes to ensure meetings take place in
accordance with the Federal Credit Union Act and Bylaws; and
[cir] Ensuring that all written policies are consistent with
applicable Insurance Regulatory laws and regulations.
3. Time related to Consumer Regulatory Issues includes the time
for tasks such as:
[cir] Ensuring that all consumer and mortgage written policies
are consistent with applicable laws and regulations.
[cir] Review of compliance with implementing corrective action
related to regulatory violations associated with consumer and
mortgage loans
[cir] Ensuring that all written policies are consistent with
applicable Consumer compliance laws and regulations.
L. Contact Report/Joint Conference/Follow-Up Procedures
1. Time related to Insurance Issues includes the time required
for tasks such as:
[cir] Communicating safety and soundness or risk management
issues to credit union officials and employees during the exit
interview process;
[cir] Documenting supervision plans for monitoring safety and
soundness concerns noted during an on-site contact;
[cir] Discussing safety and soundness or risk management
concerns with management during the joint conference;
[cir] Preparing written reports that provide guidelines for
correcting safety and soundness concerns;
[cir] Drafting correspondence for the Regional Director's
signature that discuss safety and soundness concerns;
[cir] Preparing internal monitoring reports that assess
management's progress in addressing safety and soundness or risk
management issues; and
[cir] Implementing administrative remedies designed to correct
safety and soundness or risk management concerns.
2. Time related to Insurance Regulatory Issues includes the time
for tasks related to compliance with the following:
[cir] Communicating regulatory violations related to Insurance
Regulatory issues;
[cir] Documenting supervision plans for monitoring for Insurance
Regulatory violations noted during an on-site contact;
[cir] Discussing Insurance Regulatory concerns with management
during the joint conference;
[cir] Preparing written reports that provide guidelines for
complying with Insurance Regulatory issues; and
[cir] Drafting correspondence for the Regional Director's
signature that discuss Insurance Regulatory concerns.
3. Time related to Consumer Regulatory Issues includes the time
for tasks such as:
[cir] Communicating regulatory violations related to consumer
and mortgage loans
[cir] Documenting supervision plans for monitoring Consumer
Regulatory violations noted during an on-site contact;
[cir] Discussing Consumer Regulatory concerns with management
during the joint conference;
[cir] Preparing written reports that provide guidelines for
complying with consumer regulations that do not specifically pertain
to insurance-related concerns; and
[cir] Drafting correspondence for the Regional Director's
signature that discuss Consumer Regulatory concerns.
[FR Doc. 2016-01626 Filed 1-26-16; 8:45 am]
BILLING CODE 7535-01-P