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Weekly Recap – NCUA to give budget briefing another try despite 2016 dud

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Weekly Recap – NCUA to give budget briefing another try despite 2016 dud

The weekly recap features news on regulatory actions, mergers and other issues facing the credit union space. Send tips, ideas and chatter to ken.mccarthy@spglobal.com.

In the spotlight

National Credit Union Administration Chairman J. Mark McWatters said when he joined the regulator's board in 2014 he believed it was critical to hear from outside parties about the NCUA's budget.

McWatters asked for a budget hearing the first two years he was on the board, but he was voted down. "I just thought it was important since we're using your money to get your input," he said Oct. 12 at the Cooperative Credit Union Association's annual convention.

The NCUA finally agreed to hold a budget briefing in 2016, but McWatters said it was not as helpful to the process as he would have hoped. He said creative, new ideas on budgeting were "not as forthcoming as I would have wished."

Nevertheless, the regulator will hold a public budget briefing Oct. 18. The agency will also accept written comments on the proposed 2018-2019 budget by email until 5 p.m. on Oct. 27.

The NCUA on Oct. 6 unveiled its proposed 2018 operating budget at $298.2 million, which includes a net workforce decrease of 42 full-time equivalents. The agency in July announced a restructuring plan that includes closing 40% of its regional offices, eliminating overlapping office functions and re-tooling its business model. Last year, the NCUA approved a final budget of $298.2 million for 2017 and a preliminary budget of $312.1 million for 2018.

McWatters said the agency will eventually be able to save some money by doing examinations "virtually," and so the agency is bringing people on board now to solve potential issues with conducting exams in that way. "We're spending a little bit of money in hopes of saving a lot of money in the future," he said. Those efforts will not be implemented in the next year or two, but McWatters said the agency is laying the foundation for something that will be a benefit "several years down the road."

In other news

* Credit unions are increasing spending on advertising at a greater pace than membership is growing, although their goal is not just to attract new members, but to also keep existing members engaged. Membership has climbed from 93.1 million in 2011 to 110.6 million by the second quarter of 2017, an 18.9% increase. Advertising spending was $1.04 billion in 2011, and in the most recent quarter rose to an annual rate of $1.55 billion, a 49.7% increase. Navy FCU, the largest credit union in the country, spent more than four times as much on advertising in the second quarter of 2017 as the next-highest spender, Pentagon FCU.

* With another premium assessment all but certain, the NCUA began exploring ways to keep credit unions from having to write those checks and found it could probably give those institutions a refund in the process. NCUA Chairman J. Mark McWatters, speaking Oct. 12 at the Cooperative Credit Union Association's annual convention, outlined the thinking behind the regulator voting last month to close the stabilization fund and transfer its assets and liabilities to the share insurance fund. He said credit unions likely would have faced a 6- to 8-basis-point assessment without closing the fund, possibly as early as next year.

* The House Financial Services Committee passed 22 bills on Oct. 12, including eight that were backed by the Credit Union National Association. Among other legislation, CUNA supported H.R. 3971, the Community Institution Mortgage Relief Act of 2017, which would make important changes to both the Truth In Lending Act and the Real Estate Settlements Procedures Act to reduce the burden on small financial institutions. The proposal would exempt mortgage loans made by financial institutions under $25 billion in assets from TILA's escrow requirements.

* The Consumer Financial Protection Bureau said Assistant Director of Enforcement Anthony Alexis is leaving the agency. As the head of the agency's unit responsible for pursuing wrongdoing in the financial services industry, Alexis was tasked with enforcing federal consumer financial laws. Alexis' team investigated cases of potential violations and would take legal action if needed. A spokesperson for the CFPB confirmed that Alexis would be leaving the agency but declined to offer comment on why he decided to leave or the terms of his departure.