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NAFCU Vice President of Regulatory Affairs Ann Kossachev Wednesday participated in the NCUA’s public budget briefing to share key credit union feedback on the agency’s 2022- 2023 budget proposal. In her testimony yesterday, Kossachev thanked the NCUA Board for its transparency during the budget process and shared concerns around the budget proposal.

During the briefing, Kossachev commended the NCUA for taking advantage of cost-saving opportunities for its operations during the pandemic, however, pointed out that even with these savings, the agency continues to increase its draft budget. “In fact, the 2022 Operating Budget would increase by 3.6 percent and the 2023 Operating Budget would increase by over 13 percent,” said Kossachev. “But the Operating Budget currently contains a surplus and NAFCU reiterates its recent request, in a letter dated September 21, 2021, to return any surplus funds to credit unions directly or via a credit against 2022 budgeted expenses.” 

Kossachev also sent a letter to NCUA Chairman Todd Harper, Vice Chairman Kyle Hauptman, and Board Member Rodney Hood to provide input on the NCUA’s Budget Justification and other budget materials, outlining NAFCU’s recommendations. Kossachev also called on the agency to avoid announcing policy changes through budget documents and to push forth efforts for budget decreases rather than increases. 

Regarding the NCUA’s move to add 48 new full-time equivalents (FTEs) with the majority of those FTEs being examiners Kossachev, in her letter, questioned what risks the agency was looking to mitigate and why “current resources do not allow the agency to adequately address those risks.” 

NAFCU recommends the NCUA always identify cost-saving approaches through cost-benefit analysis to demonstrate its commitment to credit unions. The association “recommends the agency focus on implementing lessons learned from the pandemic and not losing sight of the cost-savings achieved during this difficult time in the interest of returning to pre-pandemic spending and travel,” expressed Kossachev.  

Of note, Kossachev lists specific recommendations to enhance the NCUA’s 2022-2023 budget efficiency: 

• preserve the strength of the National Credit Union Share Insurance Fund (SIF) without overburdening credit unions with excessive operating fees or unnecessary SIF assessments; 
• maintain the existing Exam Flex criteria for credit unions to qualify for extended exams and incorporate exam modernization efforts;   
• achieve greater transparency regarding cybersecurity expenses; and 
• continue to support financial inclusion through the Advancing Communities through Credit, Education, Stability, and Support (ACCESS) Initiative. 

In the letter, Kossachev also cited a NAFCU survey on key risks credit union members felt warrant extra attention and that they are already devoting resources to address. Cybersecurity was identified as a top risk management concern, with over 80 percent of respondents considering it a “significant concern.” Of note, the NCUA’s draft budget and credit union members also agreed that lending trends on “increasing concentrations in select loan types” also posed a high threat. While hundreds of credit unions participated in the Small Business Administration's (SBAP) Paycheck Protection Program (PPP), many are concerned with a proposal being floated in Congress to grant the SBA direct lending authority, which could cut out the private sector from small business lending.  

Other risks highlighted include fraud prevention, declining membership trends, challenges facing smaller credit unions, as well as industry consolidation.  

Kossachev also called attention to exam-related expenses in the NCUA’s operating budget, specifically on travel expenses, which were unusually low due to the pandemic crisis. The NCUA proposes to increase its travel budget with the assumption that travel restrictions will be lifted in 2022. However, Kossachev points out that this is still uncertain and while NAFCU supports staff training and stakeholder outreach events, many of these events can still be conducted remotely and be effective, as well as cost-saving. NAFCU urges the NCUA to transition to a hybrid model, with both off-site and in-person exams to “minimize travel expenses and maintain a more efficient workforce,” according to Kossachev.  

Read the testimony and full letter here. NAFCU remains committed to working with the NCUA to ensure credit union concerns and priorities are accounted for during this budgeting process. The association will continue to advocate for credit unions’ best interests.