Trade Groups Bridle at Expansion of Regulator's Budget

WASHINGTON - The regulator of the nation's credit unions is under fire from industry trade groups for letting its budget grow while the number of credit unions is shrinking.

Kenneth Robinson, the president of the National Association of Federal Credit Unions, said he may call for a one-year to two-year moratorium on expenditures at the National Credit Union Administration.

"There is a great deal of sentiment out there that the NCUA budget is out of control," said Mr. Robinson, whose trade group is made up primarily of large credit unions. "While we recognize there has been need for some growth, there doesn't seem to be any leveling off."

The cries from the industry were ignited by a decision from the regulator in late November to relocate its headquarters to Virginia from Washington, D.C., at a cost of $41.9 million.

It came amid a rising tide of criticism from credit union industry about its regulator.

Earlier this year, officials of the Credit Union National Association, the biggest trade group, attacked the NCUA for "overregulation."

Such cries escalated after the NCUA last summer imposed a deposit insurance premium for the first time in six years.


Regulators said the trade groups are overstepping their bounds when they meddle into the budget process, claiming the budget is formulated under strict guidelines. The regulators also expect expenses to begin leveling off, and they note that fees paid by credit unions to support the agency's operating costs are substantially lower than what banks pay to their regulators.

The NCUA's budgetmore than doubled to $87.3 million in fiscal year 1992 from $42.9 million in fiscal year 1987. Mr. Robinson's group predicted it would hit $128 million in 1997.

The agency's largest expense is salaries, which grew 14.5% in fiscal year 1992 to $50.6 million from $44.2 million in 1991. Benefits rose 17.6% to $10.8 million, while travel expenses grew 3% to $10 million.

"We want a strong effective credit union agency, but we don't want one that is fat," said Larry Blanchard, a spokesman for the Credit Union National Association.

Herb Yolles, the NCUA's controller, said he went over the budget in minute detail with trade group people in August.

"There is no specific item they don't like," he said. "It is just the grand total they don't like."

The trade groups complained especially about an increase in the agency's examination staff at a time when their membership is declining. There were about 8,300 federal credit unions midway through 1991, down from 8,537 in 1990, and 8,821 in 1989. But out of 650 federal examiners, 62 were hired during the current fiscal year.

"At some point they have got to recognize you don't keep adding people when you keep reducing the number of institutions that have to be examined," Mr. Robinson said in a recent phone interview.

"It is a total oversimplification to say that just because the number of credit unions is going down, we need fewer examiners," countered Donald Johnson, executive director of the NCUA.

He said the asset size of credit unions is growing. Regulators predict that assets will rise to nearly $160 billion in 1992, up from $140 billion in 1991 and $79 billion in 1985.

Change in Credit Unions

They also said that credit unions in recent years have become more complex institutions, extending commercial real estate loans in some cases and investing in esoteric securities in others.

"It requires a great deal more training on our part and more time by examiners," said Mr. Johnson.

Agency officials also said they expect budget increases to begin leveling off next year if legislators do not require them to conduct more frequent exams.

Meanwhile, critics continue to harp on the decision to buy a new headquarters building, which the agency claims will save $35 million over 15 years. NCUA board member Robert Swan, who opposed the plan in a 2-1 decision, called it "a poor use of NCUA's and ... credit union monies," according to a report in Credit Union Times, an industry newsletter.

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