82_FR_30060 82 FR 29935 - Request for Comment Regarding Revised Overhead Transfer Rate Methodology

82 FR 29935 - Request for Comment Regarding Revised Overhead Transfer Rate Methodology

NATIONAL CREDIT UNION ADMINISTRATION

Federal Register Volume 82, Issue 125 (June 30, 2017)

Page Range29935-29948
FR Document2017-13635

In a voluntary effort to invite input from stakeholders, the NCUA Board (Board) is seeking comments on proposed changes to the Overhead Transfer Rate (OTR) methodology. The primary goal of the proposed changes are to reduce the complexity of the OTR methodology. The proposed changes would also reduce the resources needed to administer the OTR. This document provides a summary of and response to comments received on the current OTR methodology, and explains and solicits comments on the proposed changes to the OTR methodology.

Federal Register, Volume 82 Issue 125 (Friday, June 30, 2017)
[Federal Register Volume 82, Number 125 (Friday, June 30, 2017)]
[Notices]
[Pages 29935-29948]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-13635]


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NATIONAL CREDIT UNION ADMINISTRATION


Request for Comment Regarding Revised Overhead Transfer Rate 
Methodology

AGENCY: National Credit Union Administration (NCUA).

ACTION: Request for comment.

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SUMMARY: In a voluntary effort to invite input from stakeholders, the 
NCUA Board (Board) is seeking comments on proposed changes to the 
Overhead Transfer Rate (OTR) methodology. The primary goal of the 
proposed changes are to reduce the complexity of the OTR methodology. 
The proposed changes would also reduce the resources needed to 
administer the OTR. This document provides a summary of and response to 
comments received on the current OTR methodology, and explains and 
solicits comments on the proposed changes to the OTR methodology.

DATES: Comments must be received on or before August 29, 2017 to ensure 
consideration.

ADDRESSES: You may submit comments by any one of the following methods 
(Please send comments by one method only):
     NCUA Web site: https://www.ncua.gov/about/pages/board-comments.aspx.
     Email: Address to [email protected]. Include ``[Your 
name]--Comments on OTR Methodology'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Gerald Poliquin, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.

[[Page 29936]]

     Hand Delivery/Courier: Same as mailing 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 in 
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 email to [email protected].

FOR FURTHER INFORMATION CONTACT: Russell Moore or Julie Decker, Loss/
Risk Analysis Officers, Office of Examination and Insurance, National 
Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 
22314 or telephone: (703) 518-6383 or (703) 518-6384.

SUPPLEMENTARY INFORMATION: NCUA requested comments on the current OTR 
methodologies and processes through a notice in the Federal Register 
published on January 27, 2016.\1\ Areas the Board specifically sought 
comments on included:
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    \1\ 81 FR 4804 (Jan. 27, 2016).
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     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.
    Within the 90-day comment period, NCUA received 40 comment letters 
on the OTR methodology. The commenters included federally insured 
state-chartered credit unions, national credit union trade 
organizations, state leagues, and state supervisory authorities. There 
were no comment letters received from federal credit unions. While 
there were only 40 comment letters, the comments addressed a broad 
range of complex issues. In addition to reviewing comments for input on 
the existing approach, NCUA staff explored options for the Board to 
consider for improving the OTR methodology. Many of the comment letters 
discussed the methodologies for both the OTR and the Operating Fee as 
well as other budget-related issues. This request for comments focuses 
specifically on the OTR methodology. Comments related to the Operating 
Fee methodology and other budget-related issues were referred to the 
appropriate office.
    Based on the comments and NCUA's internal assessment, the Board is 
considering changes to the OTR methodology.

Table of Contents

I. Background
II. Legal Authority Comments and Responses
III. Current OTR Methodology and Process Comments and Responses
IV. Details of Proposed OTR Methodology
V. Request for Comment

I. Background

    NCUA administers the Federal Credit Union Act (the Act), which is 
comprised of three Titles: Title I--General Provisions, Title II--Share 
Insurance, and Title III--Central Liquidity Facility. The agency's 
mission is to ``provide, through regulation and supervision, a safe and 
sound credit union system, which promotes confidence in the national 
system of cooperative credit.'' \2\ This includes protecting member 
rights and deposits. Specifically, NCUA charters, regulates, and 
insures shares in federal credit unions and insures shares and deposits 
in federally insured state-chartered credit unions through the National 
Credit Union Share Insurance Fund (Share Insurance Fund).
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    \2\ https://www.ncua.gov/About/Pages/Mission-and-Vision.aspx.
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    NCUA is responsible for ensuring federally insured credit unions 
operate safely and soundly and comply with all applicable laws and 
regulations within NCUA's jurisdiction.\3\ In so doing, the agency 
mitigates risk to the Share Insurance Fund and prevents taxpayer-funded 
bailouts.
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    \3\ In coordination with State Supervisory Authorities with 
respect to federally insured state-chartered credit unions.
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    To achieve its statutory mission, the agency incurs various 
expenses, including those involved in examining and supervising 
federally insured credit unions. The Board adopts an Operating Budget 
each year to fund the vast majority of the costs of operating the 
agency.\4\ The Act authorizes two primary sources to fund the Operating 
Budget: (1) Requisitions from the Share Insurance Fund; and (2) 
Operating Fees charged to federal credit unions.\5\
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    \4\ Some costs are directly charged to the Share Insurance Fund 
or the Temporary Corporate Credit Union Stabilization Fund when 
appropriate to do so. For example, costs for training and equipment 
provided to State Supervisory Authorities are directly charged to 
the Share Insurance Fund.
    \5\ Other sources of funding for the Operating Budget include 
interest income, funds from publication sales, parking fee income, 
and rental income.
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    In 1972, the Government Accountability Office recommended NCUA 
adopt a method for properly allocating Operating Budget costs--that is 
the portion to be funded by requisitions from the Share Insurance Fund 
and the portion to be covered by Operating Fees paid by federal credit 
unions.\6\ NCUA has since used an allocation methodology, known as the 
OTR, to determine how much of the Operating Budget to fund with a 
requisition from the Share Insurance Fund.
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    \6\ http://www.gao.gov/assets/210/203181.pdf.
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    NCUA has employed various allocation methods over the years, with 
the current methodology adopted in 2003. For a chronological summary of 
the history of the OTR, refer to Overhead Transfer Rate (OTR)--Timeline 
at https://www.ncua.gov/About/Documents/Budget/Misc%20Documents/overhead-transfer-rate-chronology.pdf. For a detailed explanation of 
the current methodology, refer to Federal Register--NCUA Request for 
Comment Regarding Overhead Transfer Rate Methodology at https://www.federalregister.gov/documents/2016/01/27/2016-01626/request-for-comment-regarding-overhead-transfer-rate-methodology.

II. Legal Authority Comments and Responses

    The Board detailed the legal parameters within which it must fund 
the NCUA Operating Budget in the January 2016 notice and request for 
comment.\7\ While the Board did not expressly solicit comments on said 
authorities, a number of comments addressed NCUA's legal authority. 
Below the Board restates the legal parameters outlined in the January 
2016 notice. Within these parameters, NCUA has developed a new OTR 
methodology proposed in this publication that continues to ensure 
application that is fair to both federal credit unions and federally 
insured state-chartered credit unions, and that is consistent across 
all of NCUA's cost centers.
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    \7\ 81 FR 4804 (Jan. 27, 2016).
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a. Legal Authority

    NCUA charters, regulates and insures shares in federal credit 
unions and insures shares and deposits in federally insured state-
chartered credit unions. To cover expenses related to its statutory 
mission, the Board adopts an Operating Budget in the fall of each year. 
The Act authorizes two primary sources to fund the Operating Budget: 
(1) Requisitions from the Share Insurance Fund ``for such 
administrative and other expenses incurred in carrying out the purposes 
of

[[Page 29937]]

[Title II of the Act] as [the Board] may determine to be proper''; \8\ 
and (2) ``fees and assessments (including income earned on insurance 
deposits) levied on insured credit unions under [the Act].'' \9\ Among 
the fees levied under the Act are annual Operating Fees, which are 
required for federal credit unions 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 Act,] including the examination and supervision 
of [federal credit unions].'' Taken together, these dual primary 
funding authorities effectively require the Board to determine which 
expenses are appropriately paid from each source while giving the Board 
broad discretion in allocating these expenses.
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    \8\ 12 U.S.C. 1783(a).
    \9\ 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 allocate agency expenses between these two primary funding 
sources, NCUA uses the OTR. The OTR represents the formula NCUA uses to 
allocate insurance-related expenses to the Share Insurance Fund under 
Title II. Almost all other operating expenses are collected through 
annual Operating Fees paid by federal credit unions.\10\ Two statutory 
provisions directly limit the Board's discretion with respect to Share 
Insurance Fund requisitions for NCUA's Operating Budget and, hence, the 
OTR. First, expenses funded from the Share Insurance Fund must carry 
out the purposes of Title II of the Act, which relate to share 
insurance.\11\ Second, NCUA may not fund its entire Operating Budget 
through charges to the Share Insurance Fund.\12\ NCUA has not imposed 
additional policy or regulatory limitations on its discretion for 
determining the OTR. If NCUA's OTR methodology were challenged, the 
court would uphold NCUA's methodology unless it were shown to be 
arbitrary or capricious, contrary to law, or unsupported by statutory 
authority under the Administrative Procedure Act (APA).\13\ The Board 
believes the existing OTR and this proposal are fully consistent with 
the APA and all other applicable law.\14\
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    \10\ 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 [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 
was discussed in a separate Federal Register publication.
    \11\ 12 U.S.C. 1783(a).
    \12\ The Act in 12 U.S.C. 1755(a) states, ``[i]n accordance with 
rules prescribed by the Board, each [federal credit union] 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.'' See also 12 U.S.C. 1766(j)(3).
    \13\ 5 U.S.C. 706(2).
    \14\ See, e.g., Motor Vehicle Mfrs. Ass'n of United States, Inc. 
v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29 (1983).
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b. Comments

    In response to its initial OTR notice, NCUA received a variety of 
comments related to the legal authority to requisition funds from the 
Share Insurance Fund to cover a portion of the Operating Budget. 
Several commenters stated the agency does not have authority or 
discretion to establish and determine the OTR. Some commenters asserted 
that NCUA lacks the legal authority to use the Share Insurance Fund to 
cover costs of operating the agency. Other commenters claimed NCUA has 
only very narrow authority to allocate costs, has too broadly 
interpreted its authority, and may assign to the Share Insurance Fund 
only those costs directly associated with share insurance payments for 
failed or troubled credit unions. Some commenters insisted NCUA is 
required to fund the vast majority of the cost of operating the agency 
through Operating Fees charged to federal credit unions, claiming 
Congress intended that Operating Fees were to subsidize costs in 
managing risk to the Share Insurance Fund. Having considered these 
comments, NCUA maintains that a plain reading of the Act, as described 
in section II.a. above and in the January 2016 notice, supports the 
agency's legal authority and broad discretion in allocating operating 
costs.
    Various commenters disagreed with the agency's legal analysis and 
argued that some combination of 12 U.S.C. 1781(b)(1), 1782(a)(5), and 
1790 also limit NCUA's requisition of funds from the Share Insurance 
Fund for the Operating Budget. Several commenters went further and 
argued that Title II's legislative history indicates the savings from 
NCUA's reliance on Title I and State Supervisory Authority examinations 
and reports should accrue to the benefit of the Share Insurance Fund. 
The Act's plain language does not require an analysis of the 
legislative history.\15\ Even if legislative history was applicable in 
this case, the plain reading of the Act is consistent with the 
legislative history and does not support commenters' interpretation 
that Congress intended costs savings provisions to only accrue to the 
Share Insurance Fund as discussed below.
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    \15\ See, e.g., Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 
((2002).
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    Multiple commenters stated that the plain language of the Act 
requires the Board to structure examinations and Call Reports 
originally required under Title I so they may be used for Title II 
share insurance purposes.\16\ These commenters similarly stated that 
the Act places requirements on NCUA to use state regulator examinations 
and reports to the maximum extent feasible.\17\ In response, the Board 
notes that Title II, in 12 U.S.C. 1781(b)(2), authorizes examinations 
as needed for the protection of the Share Insurance Fund and other 
credit unions in addition to those permitted under Title I, recognizing 
that the scope and timing of Title I examinations does not necessarily 
satisfy share insurance needs under Title II. Regardless of the parsing 
of the various statutory provisions on this point, the Board is careful 
to build efficiencies wherever reasonable in light of NCUA's dual roles 
as (1) charterer and prudential regulator of federal credit unions and 
(2) insurer of federal credit unions and federally insured state-
chartered credit unions. Efficiencies gained from NCUA's dual role 
provide cost savings and help avoid subjecting credit unions to the 
burden of redundant examinations. Further, the Act's provisions on cost 
savings do not prohibit NCUA from allocating insurance-related 
operating expenses to the Share Insurance Fund through the OTR under 12 
U.S.C. 1783(a). Specifically, 12 U.S.C. 1781(b)(1) requires NCUA to 
adjust the way it conducts examinations of federal credit unions so 
they may be ``utilized for share insurance purposes.'' This provision 
does result in cost savings. However, it does not preclude NCUA from 
allocating the costs of the ``share insurance purposes'' portion of 
federal credit union examinations to the Share Insurance Fund.\18\ The 
Board thus disagrees with commenters that argued that the Act requires 
the cost-savings of NCUA's dual roles to accrue specifically to the 
Share Insurance Fund.
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    \16\ 12 U.S.C. 1781(b)(1), 1782(a)(5).
    \17\ Id.
    \18\ With respect to call reports and other ongoing reports 
submitted by federally insured credit unions, 12 U.S.C. 1782(a)(5) 
is also a cost savings provision but does not preclude allocating 
insurance-related costs of the applicable data collections to the 
Share Insurance Fund.
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    While the Board did not cite 12 U.S.C. 1790 as an additional 
limitation in its earlier notice, the Board agrees with commenters 
stating that this provision should inform NCUA's interpretation of 
Title II so that it consciously avoids discrimination against federally 
insured

[[Page 29938]]

state-chartered credit unions to the benefit of federal credit 
unions.\19\ However, the Board does not believe that either the current 
or the proposed OTR process discriminates against federally insured 
state-chartered credit unions or federal credit unions to the benefit 
of the other.
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    \19\ 12 U.S.C. 1790 (``It is not the purpose of this subchapter 
to discriminate in any manner against State-chartered credit unions 
and in favor of Federal credit unions, but it is the purpose of this 
subchapter to provide all credit unions with the same opportunity to 
obtain and enjoy the benefits of this subchapter.'').
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    As background, all federally insured credit unions are subject to 
the same requirements for funding the Share Insurance Fund. 
Specifically, Sec.  1782(c)(1)(A)(i) requires that ``[e]ach insured 
credit union shall pay to and maintain with the [Share Insurance Fund] 
a deposit in an amount equaling 1 per centum of the credit union's 
insured shares.'' Section 1782(c)(2)(A) requires that ``[e]ach insured 
credit union shall, at such times as the Board prescribes (but not more 
than twice in any calendar year), pay to the Fund a premium charge for 
insurance in an amount stated as a percentage of insured shares (which 
shall be the same for all insured credit unions).'' Thus, in funding 
the Share Insurance Fund, federal credit unions and federally insured 
state-chartered credit unions are not treated any differently. 
Similarly, the requisitions from the Share Insurance Fund used to fund 
the insurance-related expenses of NCUA's Operating Budget under Sec.  
1783(a) do not distinguish between federal credit unions and federally 
insured state-chartered credit unions.
    As for the OTR methodology and whether it complies with Sec.  1790, 
the OTR methodology only considers the type of activity (i.e. 
insurance-related or not) and treats the expenses related to that 
activity the same regardless of the type of charter to which the 
activity applies. Specifically, both the existing and proposed OTR 
methodologies provide that all insurance-related expenses are funded 
from the Share Insurance Fund, regardless of charter type.
    The Act clearly permits expenses related to insurance to be funded 
by the Share Insurance Fund regardless of charter. Specifically, 12 
U.S.C. 1783(a) expressly allows expenses ``incurred in carrying out the 
purposes of [Title II]'' to be allocated to the Share Insurance Fund. 
The costs NCUA incurs in safeguarding the Share Insurance Fund relate 
to the risks in federal credit unions and federally insured state-
chartered credit unions. The Act provides the Board with a number of 
specific authorities that relate to costs NCUA incurs in carrying out 
its obligations under Title II. For instance, Title II of the Act 
authorizes the Board ``to appoint examiners who shall have the power, 
on its behalf, to examine any insured credit union . . . whenever in 
the judgment of the Board an examination is necessary to determine the 
condition of any such credit union for insurance purposes.'' \20\ 
Further, Title II authorizes the Board to implement regulations 
applicable to all insured credit unions to address risk to the Share 
Insurance Fund. Title II states the Board may ``prescribe such rules 
and regulations as it may deem necessary and appropriate to carry out 
the provisions of this subchapter.'' \21\ Title II also grants the 
Board the following additional authorities relevant to agency operating 
costs:
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    \20\ 12 U.S.C. 1784(a).
    \21\ 12 U.S.C. 1789(a)(11).
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     ``Appoint such officers and employees as are not otherwise 
provided for in this chapter;'' \22\
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    \22\ 12 U.S.C. 1789(a)(4).
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     ``employ experts and consultants or organizations 
thereof;'' \23\
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    \23\ 12 U.S.C. 1789(a)(5).
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     ``prescribe the manner in which its general business may 
be conducted and the privileges granted to it by law may be exercised 
and enjoyed;'' \24\
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    \24\ 12 U.S.C. 1789(a)(6).
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     ``exercise all powers specifically granted by the 
provisions of this subchapter and such incidental powers as shall be 
necessary to carry out the power so granted;'' \25\ and
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    \25\ 12 U.S.C. 1789(a)(7).
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     ``make examinations of and require information and reports 
from insured credit unions, as provided in this subchapter.'' \26\
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    \26\ 12 U.S.C. 1789(a)(8).
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    The Board concludes that these authorities taken together provide 
NCUA as insurer with broad discretion to impose regulations on and 
examine all insured credit unions. In addition, the cost of the agency 
activities associated with exercising these and other accompanying 
authorities can properly be considered costs of carrying out Title II 
of the Act.\27\
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    \27\ For example, Title II specifically addresses a broad range 
of standards for all insured credit unions, including standards for 
insurance against burglary and defalcation, loss reserve 
requirements, investment limitations, ongoing reporting requirements 
(such as the Call Report), independent audits, accounting 
principles, national flood insurance program requirements, liquidity 
capacity, unsafe and unsound conditions or practices, security 
standards, recordkeeping, monetary transaction and recordkeeping and 
reporting, benefits to institution affiliated parties, capital 
standards, and approval of officials.
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    Finally, a number of commenters argued that the OTR methodology 
and/or calculations either should or must go through full APA notice 
and comment rulemaking. The APA does not require notice and comment for 
the OTR methodology. The legal analysis of NCUA's Office of General 
Counsel on the applicability of the notice and comment provisions of 
the APA to the OTR methodology is summarized in the January 2016 OTR 
notice \28\ and articulated more fully in a legal opinion posted on 
NCUA's Web site.\29\ In soliciting comment on the OTR through the 
Federal Register NCUA has gone, and continues to go, beyond its APA 
obligations.
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    \28\ 81 FR 4804 (Jan. 27, 2016) (``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. [ ] 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.[ ] Beyond its APA obligations, the Board has chosen 
to solicit public comments on the OTR processes and methodologies 
through this Federal Register publication.'').
    \29\ 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.
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III. Current OTR Methodology and Process Comments and Responses

a. Formula Driven or Set at the Discretion of the Board

    The majority of commenters expressed support for NCUA's continued 
use of a formula to determine the OTR. The Board agrees NCUA should 
continue to use a formula to determine the OTR. Use of a well-designed 
and comprehensive formula represents a good faith effort to consider 
all of the agency's costs relative to how NCUA is carrying out its 
various responsibilities. A formula also helps ensure costs assigned to 
the OTR relate to agency activities to carry out Title II 
responsibilities. NCUA's goal in using a formula-driven OTR methodology 
is to provide a comprehensive, fair, and equitable allocation of costs 
within a framework that can be administered at a relatively low cost. 
Though it is formula driven, the Board can adjust the methodology at 
any time to ensure it continues to reflect the most equitable and 
suitable approach to allocating costs.
    However, five commenters favored setting the OTR at a fixed 50 
percent of

[[Page 29939]]

the Operating Budget. Commenters that supported setting the OTR at 50 
percent indicated that it is easily understandable, more in line with 
the dual functions of NCUA as regulator and insurer, and that the OTR 
was set at 50 percent for many years. The Board does not believe it is 
transparent or appropriate to set the OTR at any level, such as the 50 
percent recommended by commenters, without a reasoned basis to 
demonstrate that level of agency operating costs are properly allocated 
to Title II activities.\30\ However, the Board agrees that the OTR 
methodology can be simplified and maintain a sufficient degree of 
comprehensiveness to ensure it is equitable. Such a simplification 
should improve understanding of the OTR and reduce administrative 
costs. For a discussion of how the Board proposes to simplify the OTR 
methodology, see section IV.
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    \30\ See 12 U.S.C. 1783(a).
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b. Delegation of the OTR Calculation to NCUA Staff

    Ten commenters objected to the Board's delegation of the OTR 
calculation to NCUA staff. They argued that by doing so the Board 
abdicated its oversight and discretion over the OTR and that it will 
result in reduced transparency. During the November 29, 2015, Board 
meeting, the Board approved the delegation of authority to administer 
the Board approved OTR methodology to the Director of the Office of 
Examination and Insurance (E&I).\31\
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    \31\ NCUA Board Action Bulletin found at the following web 
address: https://www.ncua.gov/About/Pages/board-actions/bulletins/2015/november/BAB20151119.aspx.
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    Delegating the ministerial application of the Board approved OTR 
methodology does not mean the Board has abdicated its oversight and 
discretion for the OTR. With limited exceptions not at play here, the 
Act permits the Board to ``delegate to any officer or employee of the 
Administration such of its functions as it deems appropriate.'' \32\ 
Further, the current delegation to staff to administer the OTR does not 
provide staff with the power to change the methodology for calculating 
the OTR. Rather it mirrors the typical organizational separation of 
duties where the board sets policy and staff implements the policy. The 
Board retains approval authority over the methodology that is used to 
calculate the OTR; only the Board can change the OTR methodology or use 
its discretion to change the OTR from the calculated result if 
circumstances so warranted. However, having the OTR set by a Board 
approved formula, instead of an explicit Board vote each year, helps 
avoid any perception that the agency would casually override the 
calculation in setting the OTR. At any time, any Board member may 
request a Board vote be scheduled to change the OTR methodology, or to 
change the OTR from the calculated result.
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    \32\ 12 U.S.C. 1789(a)(10); see also 1766(d).
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    The delegation has not resulted in a reduction in transparency. As 
was done prior to the delegation, each year staff submits a report to 
the Board on the results of the calculation and conducts a briefing at 
a public Board meeting. The materials supporting the OTR calculation 
and the result are provided as part of the public Board briefing and 
posted on the agency's Web site. The Board intends for this public 
reporting to continue. Further, the Board is committed to soliciting 
public input at least every three years on the OTR methodology, and any 
time a change to the methodology is considered.

c. Transparency

    Nine commenters stated that the current OTR methodology is not 
sufficiently transparent. NCUA has made various efforts over the years 
to be transparent with respect to the OTR, and recently published 
extensive information about the OTR. The setting of the OTR has been 
briefed and acted on each year at a public Board meeting. The 
associated Board Action Memorandums, which are public records, fully 
detailed the calculation and included supporting materials. The current 
methodology was extensively reviewed at a public Board meeting when 
adopted in 2003. All related materials have been made a matter of 
public record and posted on NCUA's Web site. Numerous analyses, 
independent evaluations, and other documents are available in public 
records and on NCUA's Web site. To improve transparency further, the 
agency organized and posted a variety of new and historical materials 
on its Web site in 2015.\33\ Additionally, the January 27, 2016, 
request for comment regarding the OTR methodology provided detailed 
explanations for the processes and methodology related to calculating 
the OTR. Although all information related to the OTR calculation is 
publicly available already, the Board acknowledges that an obstacle to 
transparency is the complexity of the methodology itself. In an effort 
to address the transparency concern, the Board is considering 
simplifying the OTR methodology. While still formula driven, the 
proposed changes to the methodology would provide for a simpler 
approach that remains comprehensive, fair, and equitable. The proposed 
changes to the methodology are described in detail in section IV of 
this document.
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    \33\ Materials related to the OTR can be found at www.ncua.gov/About/Pages/budget-strategic-planning/supplementary-materials.aspx.
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d. Definition of Insurance-Related Activities

    NCUA's definition of insurance-related activities received the most 
comments. Of the 36 commenters on this topic, most disagree with the 
definition NCUA uses for insurance-related activities. Many commenters 
objected to equating ``safety and soundness'' with ``insurance-
related,'' with some arguing that the charterer/prudential regulator 
cares about safety and soundness and it is therefore not the sole 
domain of the insurer. Commenters asserted the definition assumes that 
NCUA has no safety and soundness oversight in its role as regulator and 
charterer of federal credit unions. By doing so, commenters claim NCUA 
is shifting expenses that should fall under the operating fee paid by 
federal credit unions to the Share Insurance Fund.
    NCUA recognizes the historical role of a charterer/prudential 
regulator involves enforcing laws and implementing public policy. 
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, preserve access to financial services, and 
safeguard the stability of the economy. Though not responsible for the 
financial liability that comes with the role of insurer, prudential 
regulators are concerned with potential threats to the viability of 
their financial institutions to protect consumers and their 
jurisdiction's economy. This focus on viability benefits the insurer, 
whose primary role is to protect depositors and the taxpayer and 
contribute to the stability of the financial system.
    NCUA has a unique dual role in that it serves as both the regulator 
of federal credit unions and the insurer of all federally insured 
credit unions.\34\

[[Page 29940]]

Congress established the Share Insurance Fund and assigned its 
administration to the Board.\35\ This arrangement has a variety of 
benefits. A regulator/supervisor with insurance responsibility creates 
a strong alignment of incentives in preserving safety and soundness, 
thereby managing risk to the Share Insurance Fund. The appropriate 
combination of functions reduces the likelihood that a regulator would 
act without adequate regard for the insurance implications. It also 
generally avoids additional and duplicative oversight costs, and the 
corresponding burden on insured institutions of separate requirements 
and supervision from a different regulator and insurer.
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    \34\ 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.
    \35\ 12 U.S.C. 1782, 1783.
---------------------------------------------------------------------------

    Given its multiple roles, NCUA appropriately allocates costs 
associated with activities connected to each role. Various provisions 
of the Act, as noted earlier, govern or inform this allocation. Thus, 
NCUA currently categorizes those activities designed to manage risk to 
the Share Insurance Fund as ``insurance-related.'' This includes 
activities designed to enforce regulations NCUA adopts to carry out the 
purpose of Title II (Share Insurance) as well as related examination 
and supervision activities.\36\ NCUA's categorization focuses on the 
primary motivation for the regulation or examination and supervision 
activity. The motivation for insurance-related regulations and 
examination activities is based on the nature of the threat to the 
viability of the institution, and therefore potential losses to the 
Share Insurance Fund. The insurance-related definition excludes 
procedures that assess compliance with other regulations. Consumer 
protection and other laws and regulations (such as field of membership 
rules) designed to otherwise govern how credit unions operate, and 
related examination activities, are not primarily intended to reduce 
the potential for losses to the Share Insurance Fund. Moreover, while 
systemic and egregious violations of such laws could result in material 
fines to the institution, such occasions are very infrequent and rarely 
result in the failure of the institution or losses to the Share 
Insurance Fund.
---------------------------------------------------------------------------

    \36\ As noted in the Legal Authority section, NCUA has the 
authority to promulgate rules and regulations to carry out the 
purpose of Title II--Share Insurance. Accordingly, the NCUA Board 
has approved rules and regulations that specifically address credit 
union activities that pose risk to the Share Insurance Fund. NCUA 
has mapped all examination related rules and regulations to one of 
two categories: insurance regulatory related, or non-insurance or 
consumer regulatory related. This regulatory mapping provides the 
basis for determining how examination time is reported for use in 
the current OTR methodology. The mapping is discussed in detail in 
the 2013 independent study by PwC and in NCUA's January 2016 request 
for comment.
---------------------------------------------------------------------------

    Thus, NCUA currently allocates costs associated with regulating and 
examining the safety and soundness of insured institutions as 
insurance-related. Worthy of note, Congress uses ``safety and 
soundness'' and related terminology in the Act.\37\ There are two 
subjects in Title I containing safety and soundness terminology: the 
interest rate ceiling for federal credit unions (12 U.S.C. 
1757(5)(A)(vi)(I)) and provisions regarding multiple common bond groups 
(12 U.S.C. 1759(d) and 12 U.S.C. 1759(f)). The current safety and 
soundness language applying to these two subjects in Title I was added 
after Title II was enacted. There are 19 references to safety and 
soundness in Title II. These provisions cover a range of subjects.\38\ 
In particular, NCUA's various enforcement authorities for violations of 
laws or regulations and unsafe or unsound conditions or practices are 
contained in Title II. Thus, most of Congress' focus on safety and 
soundness in the Act is in the context of share insurance.
---------------------------------------------------------------------------

    \37\ ``Safe and sound,'' ``safety and soundness,'' and ``unsafe 
or unsound'' are the terminology encompassing safety and soundness 
found in the Act.
    \38\ See 12 U.S.C. 1781(c)(2), 1782(a)(6)(B), 1786(b), 1786(e), 
1786(f), 1786(g), 1786(k)(2), 1786(r), 1786(s), and 1790d(h).
---------------------------------------------------------------------------

    However, NCUA acknowledges that safety and soundness is not the 
sole domain of the insurer; prudential regulators have various 
responsibilities with respect to the ``safety and soundness'' of 
institutions they oversee. In some respects this is recognized in the 
current OTR formula through the ``Imputed SSA Value.'' To better 
reflect that the prudential regulator and insurer both have 
responsibilities for safety and soundness, the Board is considering 
adjusting the OTR methodology so safety and soundness is not accounted 
for as the primary domain of the insurer. For more information on the 
proposed change to the OTR methodology, see section IV.
    One commenter stated that routine examinations of all insured 
credit unions should be paid through Operating Fees. Another commenter 
asserted that the OTR should only be used for examinations of federally 
insured state-chartered credit unions and examinations of troubled 
federal credit unions. These recommendations assume that as insurer, 
NCUA takes only a reactive approach to managing risk to the Share 
Insurance Fund.
    The Board notes that NCUA's role as insurer is best fulfilled by a 
proactive approach to preventing losses, not just addressing troubled 
or failed institutions. Since the implementation of federal share 
insurance in 1970, the Board has instituted a more proactive 
examination and supervision program geared toward safety and soundness 
to better manage risk to the Share Insurance Fund. Additionally, as 
credit unions have become larger and more complex, the risks to the 
Share Insurance Fund have changed, with NCUA making corresponding 
adaptions to its operations. In 2002, the Board strengthened its 
commitment to fulfilling NCUA's role as insurer by implementing the 
Risk-Focused Examination Program. As recently as 2016, the Board made 
the examination program even more risk-based by adopting an extended 
examination cycle for healthy, well-run credit unions. These programs 
base examination scope and timing largely on the risks an institution 
poses to the Share Insurance Fund. Further, the objective of the risk-
focused examination is to enable NCUA to identify and address risks 
before they become a major problem. All of these changes have resulted 
in an increase in the agency's insurance-related activities.
    The Act and NCUA Regulations have also evolved, resulting in more 
emphasis on safeguarding the Share Insurance Fund. For example:
    1. The Credit Union Membership Access Act was enacted into law in 
1998.\39\ This law resulted in new obligations on credit unions and 
NCUA, such as prompt corrective action, designed to protect the Share 
Insurance Fund.
---------------------------------------------------------------------------

    \39\ Information about the Credit Union Membership Access Act is 
contained within NCUA Letter to Credit Unions 98-CU-16 located at 
the following web address: https://www.ncua.gov/Resources/Documents/LCU1998-16.pdf.

---------------------------------------------------------------------------

[[Page 29941]]

    2. During the aftermath of the financial crisis, the Board 
strengthened critical safety and soundness rules, such as interest rate 
risk and liquidity management standards.
    3. NCUA also has been providing regulatory relief. New authorities 
and less prescriptive, more principles-based rules have helped to 
reduce compliance burdens and provide credit unions with more authority 
to serve members and manage risk. They result in examiners devoting 
more time to ensuring safety and soundness through the examination 
process rather than relying on regulatory limits.
    Under this proactive approach, the Board's primary motivation for 
many of the agency's current regulations and the majority of the 
examination program is to manage risk to the Share Insurance Fund.
    The Board acknowledges there is not always a clear separation 
between the role of a prudential regulator concerned with enforcing 
laws and implementing public policy and that of an insurer. For 
example, NCUA relies, to the extent feasible, on the examination work 
performed by state regulators to manage risk to the Share Insurance 
Fund posed by federally insured state-chartered credit unions. This 
results in some cost savings in the NCUA Operating Budget. Since 2004, 
the value of the insurance-related work conducted by state regulators 
and relied on by NCUA has been reflected in the OTR methodology as the 
``Imputed SSA Value.'' To ensure equitable treatment, the Imputed SSA 
Value is calculated on the same cost basis as if NCUA had to conduct 
the work itself.\40\ The current methodology applies the same approach 
and definition of insurance-related examination activities to 
examinations of federally insured state-chartered credit unions as for 
federal credit unions. The Imputed SSA Value has the effect of reducing 
the OTR, thereby taking into account the fact that all insured credit 
unions benefit from the insurance-related examination costs of state 
regulators borne by state-chartered credit unions.
---------------------------------------------------------------------------

    \40\ The Imputed SSA Value for 2017 is $50.8 million.
---------------------------------------------------------------------------

    The Board recognizes that another plausible approach to accounting 
for the related missions of charterer/prudential regulator and insurer 
is to employ an alternating or partnership framework within the OTR 
methodology. This would simplify the OTR methodology and avoid having 
to delineate safety and soundness as the primary domain of the insurer. 
The concept of an alternating or partnership framework being applied to 
the OTR methodology is described in detail in section IV of this 
document.

e. State Regulator Costs

    Some commenters asserted that because NCUA equates safety and 
soundness with insurance-related activities, the OTR methodology is not 
fair and equitable as state regulators also examine federally insured 
state-chartered credit unions for safety and soundness. As a result, 
some commenters contended federally insured state-chartered credit 
unions are charged twice for safety and soundness examinations; once by 
their state regulator via an operating fee and then by NCUA via the 
OTR. Further, some commenters claimed that federally insured state-
chartered credit unions are disadvantaged when the OTR rises due to 
increased NCUA examination time allocated to insurance, because the 
NCUA operating fee paid by federal credit unions declines.
    NCUA appreciates the work state regulators do in contributing to 
the safety and soundness of the credit union system. The agency will 
continue to partner and coordinate closely with state regulators in 
this regard. It is important to note that ultimately NCUA is 
accountable for carrying out the purpose of Title II of the Act and 
managing risk to the Share Insurance Fund. The extent state regulators 
examine for safety and soundness is the choice of state governments. 
This choice, along with the adequacy of the examination, affects the 
extent to which it is feasible for NCUA to rely on these examination 
reports to meet its Title II responsibilities. State governments also 
choose the extent to which they rely on the work of NCUA in its role as 
insurer to reduce overall state costs and burden.
    State-chartered credit unions are not charged twice as a result of 
state regulators also examining for safety and soundness. The extent to 
which state regulators examine for safety and soundness in a manner 
that can be relied on by NCUA reduces the overall agency costs to which 
the OTR is applied, benefiting all insured credit unions. Conversely, 
NCUA's involvement in developing reporting and examination systems for 
all insured credit unions, publishing guidance, training and equipping 
most state examiners, and participating in the examination of federally 
insured state-chartered credit unions reduces overall state regulator 
costs.\41\ As discussed above, the current OTR methodology takes into 
account via the Imputed SSA Value the insurance-related work conducted 
by state regulators and relied on by NCUA. In addition, the Imputed SSA 
Value is calculated using the same examination time allocation for 
federal credit unions. Thus, when more of the agency's examination time 
is dedicated to insurance-related areas, the Imputed SSA Value also 
increases. The Imputed SSA Value has the effect of reducing the OTR 
(and conversely increasing the operating fee paid by federal credit 
unions) to the benefit of state-chartered credit unions. This provision 
helps ensure the current OTR methodology is fair and equitable.\42\
---------------------------------------------------------------------------

    \41\ NCUA budgeted to spend over 150,000 hours participating in 
the examination and supervision of federally insured state-chartered 
credit unions in 2017. To conduct this additional work would require 
state regulators to add an estimated 175 staff at a cost of up to 
$35 million. Most state regulators participate in NCUA's examiner 
training programs, use the agency's examination and Call Report 
systems, and benefit from the agency's exam techniques and 
supervisory guidance. State regulators would have to individually or 
collectively develop and administer these functions and systems if 
NCUA did not provide them. For context, NCUA's 2017 budget included 
the following for units associated with these functions and systems: 
$10.5 million for the Division of Training and Development; $16.4 
million for the Office of the Chief Information Officer's 
information technology operations; and $12.3 million for the Office 
of Examination and Insurance. Also, NCUA's 2017 capital budget 
includes $10.4 million to support the Enterprise System 
Modernization program; much of this program involves modernization 
of systems that directly or indirectly support supervising credit 
unions. Additionally, in 2017 NCUA budgeted $1.4 million for 
training of state examiners and $162,480 in computer lease expense 
for equipment provided to state regulators.
    \42\ Overhead Transfer Rate Review, PriceWaterhouseCoopers, 
Section 1.4.3 (January 20, 2011) (Based on PwC's review, there was 
no reasonable basis to conclude that the OTR methodology ex-ante and 
for reasons beyond the control of credit unions, favours or 
disadvantages any one type of credit unions (i.e. federal versus 
state chartered) over another.)
---------------------------------------------------------------------------

    Some commenters suggested that if the OTR continued to define all 
safety and soundness activities as insurance-related, NCUA should use 
each state regulator's actual costs instead of an imputed value. Others 
argued NCUA should pay the state governments for their actual costs 
instead of merely reducing the OTR.
    NCUA notes that it is neither feasible nor appropriate to use the 
actual state regulator costs in determining the OTR. To ensure the 
methodology is fair and equitable across all federally insured 
institutions, the Imputed SSA Value is intentionally designed to 
reflect the replacement cost to NCUA if the agency had to do the 
insurance-related work it relies on the state regulators to conduct. 
The cost structure for state regulators can vary widely and include 
non-germane and potentially inordinate costs. Also, it is not feasible 
to obtain reliable and comprehensive information

[[Page 29942]]

about the relevant cost of each state regulator. NCUA has no authority 
to compel states to provide this information, nor to maintain records 
in such a way as to ensure proper allocation of germane costs.
    As part of the process of evaluating the suggestion to use actual 
state regulator costs, NCUA attempted to obtain and review the costs of 
state regulators and their methodologies for annual and/or examination 
fees for state-chartered credit unions. This included determining how 
costs are allocated to the credit union specific activities for state 
regulators housed within state offices with broader 
responsibilities.\43\ NCUA staff first reviewed publicly available 
information with limited success. NCUA also sent letters to the state 
regulators to request details on fee structures, costs, and allocation 
factors for credit union specific activities. The information request 
did not result in sufficiently comprehensive information upon which to 
draw any reliable conclusions.\44\
---------------------------------------------------------------------------

    \43\ Based on the responses received from the state regulators, 
many state credit union programs are divisions contained within a 
larger office with funds co-mingled with other programs. The state 
regulators that responded and that do not separate funds for credit 
unions from other financial institutions supervised generally either 
do not allocate expenses or did not provide their allocation 
methodology.
    \44\ In total, 27 state regulators responded to varying degrees. 
These state regulators provided as much of the requested information 
as they could, given limitations they faced.
---------------------------------------------------------------------------

    Based on Call Report data, NCUA did compare the total Operating 
Fees as a percent of average assets paid by federal credit unions to 
those reported by federally insured state-chartered credit unions. 
Though this comparison has some limitations, the trends in Graph 1 
below show that Operating Fees recorded by federal credit unions and 
federally insured state-chartered credit unions are comparable in 
aggregate.
[GRAPHIC] [TIFF OMITTED] TN30JN17.291

    Further, federal credit unions continue to bear the majority of 
NCUA's operating costs. For NCUA's 2017 Operating Budget, federal 
credit unions cover 67 percent of the total Operating Budget through 
the operating fee and their proportional share of the OTR.

f. Regulation Mapping \45\
---------------------------------------------------------------------------

    \45\ As part of the current OTR methodology, the agency maps 
NCUA examination activities related to specific regulations based on 
the primary purpose of the regulation--whether it is for carrying 
out the purpose of Title II (insurance-related) or part of NCUA's 
responsibility as charterer or prudential regulator. For details 
regarding the regulation mapping, see Appendix A of the January 27, 
2016 request for comment.
---------------------------------------------------------------------------

    NCUA has mapped all examination-related rules and regulations to 
one of two categories: Insurance regulatory related, or non-insurance 
and consumer regulatory related. A third party has reviewed the 
regulatory mapping.\46\ NCUA reviews the regulatory mapping prior to 
the beginning of each examination time survey cycle for any necessary 
updates.\47\ A detailed review was completed again for 2017 that 
resulted in minor adjustments to classifications. For the full 
regulatory mapping, see the 2017 Mapping of NCUA Rules and Regulations 
document posted on NCUA's public Web site at https://www.ncua.gov/About/Documents/mapping-ncua-regulations-2017.pdf.
---------------------------------------------------------------------------

    \46\ PwC National Credit Union Administration (NCUA) Analysis of 
Examination Time Survey (ETS) Modifications--October 2, 2013: 
https://www.ncua.gov/About/Documents/Budget/2013/2013ETSAnalysis.pdf.
    \47\ The examiner time survey is performed annually and is used 
to determine the percentage of the workload budget relates to 
regulatory and insurance-related tasks for federal examinations and 
supervision contacts.
---------------------------------------------------------------------------

    Since NCUA equates safety and soundness with the term insurance-
related in the current OTR methodology, commenters argued that the 
mapping of NCUA's rules and regulations is faulty. Some commenters 
asserted that classifying NCUA rules as insurance-related is flawed 
because NCUA as charterer/prudential regulator is charged with ensuring 
compliance with all the provisions contained within the rules and 
regulations.
    As noted in the Legal Analysis section above, the Board has the 
authority to promulgate rules and regulations to carry out the 
provisions of Title II (Share Insurance) of the Act, as well as examine 
credit unions for share insurance purposes.\48\ Accordingly, the Board 
has approved rules and regulations that specifically address safety and 
soundness with the intent to protect the Share Insurance Fund. As such, 
the current OTR methodology accounts for examination and supervision 
activities for insurance-related regulations as an insurance cost.
---------------------------------------------------------------------------

    \48\ 12 U.S.C. 1789(a).
---------------------------------------------------------------------------

    As noted above, the Board recognizes that another plausible 
approach to accounting for the related missions of charterer/prudential 
regulator and insurer is to employ an alternating or partnership 
framework within the OTR methodology. This would simplify the OTR 
methodology in part by avoiding having to map regulations to a specific 
role as it relates to federal credit unions. The concept of an 
alternating or partnership framework being applied to

[[Page 29943]]

the OTR methodology is described in detail in section IV of this 
document.

g. Other Methodological Aspects of the OTR

    NCUA received 23 comments suggesting various other changes to the 
current OTR process. The areas of the calculation receiving comments 
were the examiner time survey, the allocation factors for various NCUA 
central offices, and the use of insured shares in the calculation.
     Examiner time survey: \49\ Commenters generally agreed 
with using a time survey in allocating the cost of federal credit union 
examination and supervision. However, some commenters suggested NCUA 
conduct a time survey during all examinations and supervision contacts 
instead of on a statistically valid sample basis. Some commenters 
suggested having state regulators complete the examiner time survey as 
well.
---------------------------------------------------------------------------

    \49\ The current examiner time survey is discussed in detail in 
the Request for Comment Regarding Overhead Transfer Rate Methodology 
published in the Federal Register on January 27, 2016.
---------------------------------------------------------------------------

    It is not necessary to have 100 percent coverage of all examination 
and supervision contacts to form a statistically valid basis for the 
survey. A complete census of all federal credit union examinations and 
supervision contacts would result in additional agency costs--all staff 
would have to be trained annually and all examinations and supervision 
contact hours would need to be increased for the time necessary to 
complete the survey.\50\ Moreover, the survey is not pertinent to 
NCUA's work in federally insured state-chartered credit unions given 
NCUA is only functioning in its capacity as insurer.\51\ The benefits 
of any small increases in precision would be outweighed by the 
corresponding costs. With respect to state regulator examinations, the 
agency has no authority to require state regulators to complete a time 
survey, and it would be challenging to ensure uniformity in how their 
time is reported. The proposed changes to the OTR methodology discussed 
in section IV would eliminate the need for an examiner time survey, 
resulting in additional cost savings.\52\
---------------------------------------------------------------------------

    \50\ Completing examination time surveys increases the time 
spent on each examination and supervision contact by an average of 
one hour. This equates to about 6,000 hours if survey data was 
collected at every onsite examination and supervision contact. 
Additionally, annual training would be required for all examiners 
and supervisory examiners. This would increase training hours for 
field staff by about 700 hours. The total additional time would be 
about 6,700 hours, approximately 6 additional employees.
    \51\ As required by law, NCUA does review compliance with the 
Bank Secrecy Act and the Flood Disaster Protection Act when it 
conducts an examination of a federally insured state-chartered 
credit union and the state regulator has chosen not to conduct the 
review. These situations are limited and the time associated with 
this activity would have an indiscernible effect on the OTR.
    \52\ Based on the most recent Examination Time Survey results, 
field staff time would be reduced by approximately 200 hours 
annually. Central office and regional office staff time devoted to 
operating, maintaining, and administering the Examination Time 
Survey and related processes would be reduced by approximately 150 
hours annually.
---------------------------------------------------------------------------

     Allocation factors for various NCUA central offices: Some 
commenters stated the allocation of costs for NCUA's non-field offices 
are not based on standard or consistent criteria. Overall, NCUA agrees 
that improvements can be made in allocation methods involving the non-
field cost centers, and is addressing this in the proposed changes to 
the OTR methodology. Some noted that the Office of National 
Examinations and Supervision (ONES) costs cannot be 100 percent safety 
and soundness as it examines natural person credit unions with assets 
over $10 billion and, therefore, has regulatory responsibility. Other 
commenters noted ONES is also responsible for reviewing Bank Secrecy 
Act compliance for the corporate credit unions it supervises, 
suggesting some non-insurance time is spent supervising them. NCUA 
agrees that ONES time is not 100 percent insurance related and this 
issue was addressed in the 2017 OTR calculation. Other commenters 
questioned why the Office of Small Credit Union Initiatives and the 
Office of Consumer Financial Protection and Access vary in their 
methodology for classifying time spent on field of membership 
expansion. NCUA agrees that there are differences in the time 
allocations and has developed a consistent standard for use in the 
proposed changes to the OTR methodology discussed in section IV.
     Use of Insured Shares: Two commenters recommended not 
using insured shares in the calculation of the OTR. The commenters 
suggested that time and resources spent in each charter type would be 
more appropriate. In developing the revised OTR methodology in 2003, 
one of the main goals of NCUA was to allocate costs as precisely as 
possible. For the current OTR methodology, it is necessary and 
appropriate to incorporate insured shares to ensure it is precise and 
equitable. Use of insured shares is consistent with the mutual nature 
of the Share Insurance Fund and part of the statutory scheme related to 
Share Insurance Fund deposits, premiums and dividends.\53\ It also 
reflects the fundamental economics with respect to how the implicit 
costs of the OTR are borne by federal and state-chartered credit 
unions. Nevertheless, there are reasonable alternative approaches to 
calculating the OTR that do not involve use of insured shares. As 
discussed in section IV, the proposed changes to the OTR method 
eliminate the need for use of insured shares in the calculation.
---------------------------------------------------------------------------

    \53\ 12 U.S.C. 1782(c)(2) and (3).
---------------------------------------------------------------------------

IV. Details of Proposed OTR Methodology

    The proposed simplification of the OTR formula is intended to 
facilitate greater understanding of the methodology, and will decrease 
the agency resources necessary to administer the OTR. The new approach 
is within NCUA's authority and, though simplified, would provide a 
sufficient level of precision with respect to the allocation of agency 
costs. The simplified formula applies the following underlying 
principles to the allocation of agency operating costs:
    1. Time spent examining and supervising federal credit unions is 
allocated as 50 percent insurance related. The 50 percent allocation 
mathematically emulates an examination and supervision program design 
where NCUA would alternate examinations, and/or conduct joint 
examinations, between its insurance function and its prudential 
regulator function if they were separate units within NCUA. It reflects 
an equal sharing of supervisory responsibilities between NCUA's dual 
roles as charterer/prudential regulator and insurer given both roles 
have a vested interest in the safety and soundness of federal credit 
unions.\54\ It is consistent with the alternating examinations FDIC and 
state regulators conduct for insured state-chartered banks as mandated 
by Congress. Further, it reflects that NCUA is responsible for managing 
risk to the Share Insurance Fund and therefore should not rely solely 
on examinations and supervision conducted by the prudential regulator.
---------------------------------------------------------------------------

    \54\ The insurer may evaluate compliance matters as part of a 
reciprocal arrangement with the prudential regulator in evaluating 
matters specific to insurance as part of the overall shared 
supervision of a credit union. A simplified assumption of equal 
sharing reflects the offsetting benefits for each role under a 
framework emulating an alternating examination program.
---------------------------------------------------------------------------

    2. All time and costs NCUA spends supervising or evaluating the 
risks posed by federally insured state-chartered credit unions or other 
entities NCUA does not charter or regulate (for example, third-party 
vendors and CUSOs) is allocated as 100 percent insurance related. NCUA 
does not charter state-chartered credit unions nor

[[Page 29944]]

serve as their prudential regulator. NCUA's role with respect to 
federally insured state-chartered credit unions is as insurer. 
Therefore, all examination and supervision work and other agency costs 
attributable to insured state-chartered credit unions is allocated as 
100 percent insurance related.
    3. Time and costs related to NCUA's role as charterer and enforcer 
of consumer protection and other non-insurance based laws governing the 
operation of credit unions (like field of membership requirements) are 
allocated as 0 percent insurance related.\55\ As the federal agency 
with the responsibility to charter federal credit unions and enforce 
non-insurance related laws governing how credit unions operate in the 
marketplace, NCUA resources allocated to these functions are properly 
assigned to its role as charterer/prudential regulator.
---------------------------------------------------------------------------

    \55\ This includes any reviews of credit unions focused solely 
on compliance, such as a fair lending exam. It does not include the 
more broadly based examinations and supervision contacts of federal 
credit unions covered by principle 1. It also does not include 
enforcing laws, like Prompt Corrective Action, that are part of 
share insurance under Title II as covered by principle 4.
---------------------------------------------------------------------------

    4. Time and costs related to NCUA's role in administering federal 
share insurance and the Share Insurance Fund are allocated as 100 
percent insurance related. NCUA conducts liquidations of credit unions, 
insured share payouts, and other resolution activities in its role as 
insurer. Also, activities related to share insurance, such as answering 
consumer inquiries about insurance coverage, are a function of NCUA's 
role as insurer.
    These four principles are applied to the activities and costs of 
the agency to arrive at the portion of the agency's Operating Budget to 
be charged to the Share Insurance Fund as discussed in detail below.
Step 1--Workload Program
    Annually, NCUA develops a workload budget based on NCUA's 
examination and supervision program to carry out the agency's core 
mission. The workload budget reflects the amount of time necessary to 
examine and supervise federally insured credit unions, along with other 
related activities, and therefore the level of field staff needed to 
implement the exam program. Applying principles 1, 2, and 3 (those 
relevant to the workload budget) to the applicable elements of the 
workload budget results in a composite rate that reflects the portion 
of the agency's overall mission program activities that are insurance 
related. For illustrative purposes, Table 1 shows the application of 
the allocation principles to the 2017 workload budget.\56\
---------------------------------------------------------------------------

    \56\ If the proposed change to the methodology is adopted by the 
Board, the calculation would apply to future workload and operating 
budgets. Thus, actual results may vary from those presented herein 
for illustrative purposes.
    \57\ Numbers may not reconcile exactly due to rounding.

                                   Table 1--Allocation of Workload Hours \57\
----------------------------------------------------------------------------------------------------------------
                                                                     Insurance-
                                            Budgeted     Percent      related
       Workload programs 2017 data          workload    insurance     workload           Allocation basis
                                             hours       related       hours
                                                  (A)          (B)    (A) x (B)
----------------------------------------------------------------------------------------------------------------
Federal Credit Union Examination &            498,159           50      249,080  Based on allocation principle 1
 Supervision.                                                                     reflecting NCUA's roles as
                                                                                  both prudential regulator and
                                                                                  insurer.
State Credit Union Examination &              167,414          100      167,414  Based on allocation principle 2
 Supervision.                                                                     reflecting NCUA's role as
                                                                                  insurer.
Consumer Compliance Reviews & Related          20,000            0            0  Based on allocation principle 3
 Training.                                                                        reflecting NCUA's role as
                                                                                  prudential regulator.
Field of Membership & Chartering........          500            0            0  Based on allocation principle 3
                                                                                  reflecting NCUA's role as
                                                                                  prudential regulator.
CUSO & Third-party Vendor Reviews.......        5,576          100        5,576  Based on allocation principle 2
                                                                                  reflecting NCUA's role as
                                                                                  insurer. Field staff time
                                                                                  conducting reviews of CUSOs
                                                                                  and third-party vendors--NCUA
                                                                                  does not charter or regulate
                                                                                  CUSOs and third-party vendors.
                                         -----------------------------------------------------------------------
    Total...............................      691,649          N/A      422,070  ...............................
                                         -----------------------------------------------------------------------
        Total Insurance-Related Workload  ...........  ...........          61%  Weighted average of field staff
         Hours to Total Workload Hours.                                           program time devoted to NCUA's
                                                                                  role as insurer.
----------------------------------------------------------------------------------------------------------------

Step 2--Operating Budget
    The Operating Budget represents the costs of the activities 
associated with achieving the strategic goals and objectives set forth 
in the NCUA Strategic Plan. The Operating Budget is based on agency 
priorities and initiatives that drive resulting resource needs and 
allocations. Information related to NCUA's budget process, including 
detailed information on the Board-approved 2017 Operating Budget, is 
available on the agency's Web site.\58\
---------------------------------------------------------------------------

    \58\ https://www.ncua.gov/About/Pages/budget-strategic-planning/supplementary-materials.aspx.
---------------------------------------------------------------------------

    The agency achieves its primary mission through the examination and 
supervision program. For the proposed formula, as applied to the 2017 
Operating Budget, the percentage of insurance-related workload hours 
(61 percent) derived from Step 1 represents the main allocation factor 
used in Step 2 for the costs of the field offices (the Regions and 
ONES). A few agency offices have roles that are significantly distinct 
enough to warrant their own allocation factors, as discussed below. A 
weighted average allocation factor (60 percent) representing the 
aggregate budgets for the Regions, Ones, and the specific agency 
offices listed in Step 2 is applied to the central offices that design 
or oversee the examination and supervision program, or support the 
agency's overall operations. These costs in total make up NCUA's 
Operating Budget. Table 2 reflects the application

[[Page 29945]]

of the OTR allocation factors to the 2017 Operating Budget as an 
example.
---------------------------------------------------------------------------

    \59\ The totals may not reconcile exactly due to rounding.

                                Table 2--Allocation of NCUA Operating Budget \59\
----------------------------------------------------------------------------------------------------------------
                                                                                                  Operating cost
                                                                     Operating        Percent     to be borne by
                      Cost area (2017 data)                          budget $        insurance       the share
                                                                     millions         related     insurance fund
                                                                                                    $ millions
                                                                             (A)             (B)       (A) x (B)
----------------------------------------------------------------------------------------------------------------
Regions and ONES: The financial budget for the agency's five               170.9              61           104.3
 regional offices and ONES is allocated based on the weighted
 average of insurance-related activities calculated from the
 workload budget in Step 1 (using principles 1, 2, and 3).
 Resources in the regions and ONES execute NCUA's examination
 program. Thus, the budgeted costs related to these programs
 should receive the same allocation basis as the programs
 themselves.....................................................
Asset Management Assistance Center: Manages liquidation payouts              7.4             100             7.4
 and assets acquired from liquidations on behalf of the Share
 Insurance Fund. Thus, the OTR allocation factor is based on
 principle 4 and allocated at 100 percent insurance related.....
Office of Consumer Financial Protection and Access Largely in                9.9              13             1.3
 NCUA's role as charterer and prudential regulator, this office
 is responsible for chartering and field-of-membership matters,
 low-income designations, bylaw amendments, consumer financial
 literacy efforts, consumer inquiries and complaints, consumer
 protection compliance, fair lending examinations, and related
 interagency coordination. These activities are allocated based
 on principle 3 as 0 percent insurance related. The office does
 some work with respect to federally insured state-chartered
 credit unions, including share insurance coverage matters, in
 NCUA's role as insurer; these activities are allocated based on
 principle 4 as 100 percent insurance related. The net of this
 combined activity results in an allocation factor of 13 percent
 insurance related. See discussion below for more details.......
Office of Small Credit Union Initiatives: Provides consulting                6.5              60             3.9
 and training services for small credit unions, both federal
 credit unions and federally insured state-chartered credit
 unions. Also processes grants and loans for federally insured
 credit unions. Principle 1 is applied to the office's work with
 federal credit unions and principle 2 is applied to the
 office's work with federally insured state-chartered credit
 unions. The net of this combined activity results in an
 allocation factor of 60 percent insurance related. See
 discussion below for more details..............................
Subtotal: The 60 percent subtotal factor represents the dollar-            194.6              60           116.8
 weighted average of the above four cost centers (Regions and
 Ones, Asset Management Assistance Center, Office of Consumer
 Financial Protection and Access, and Office of Small Credit
 Union Initiatives) representing specific aspects of NCUA's
 mission........................................................
All Other Offices: This category includes the offices that                 103.6              60            62.2
 design or oversee the agency's mission and its related offices,
 or provide necessary support to mission offices or the entire
 agency. As such, the proportion of insurance-related activities
 for these offices correspond to that of the mission offices.
 Therefore, these office costs are allocated based on the
 weighted average of insurance-related activities calculated in
 the subtotal above.............................................
                                                                 -----------------------------------------------
    Total.......................................................           298.2  ..............           179.0
----------------------------------------------------------------------------------------------------------------

Regional Offices and ONES
    The financial budget for the agency's five regional offices and 
ONES is allocated based on the weighted average of non-insurance and 
insurance-related activities calculated in Step 1. The Regions and ONES 
execute NCUA's examination programs; thus, the budgeted costs related 
to these offices should receive the same allocation basis as the 
programs themselves. The allocation factor is based on principles 1, 2, 
and 3 as documented in Table 1. The budget for the regional offices and 
ONES is allocated at 61.0 percent for insurance-related activities.
Asset Management Assistance Center
    NCUA conducts credit union liquidations and performs management and 
recovery of assets through the Asset Management and Assistance Center. 
The Asset Management Assistance Center 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 the Asset Management Assistance Center is to manage and 
reduce costs to the Share Insurance Fund and credit union members of 
credit union failures. Thus, OTR allocation is based on principle 4 at 
100 percent insurance related.
Office of Consumer Financial Protection and Access
    This division 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. The 
majority of the work performed by the Office of Consumer Financial 
Protection and Access is related to NCUA's role as prudential regulator 
and

[[Page 29946]]

charterer of federal credit unions. This office is unique and differs 
from the Regions and ONES in the distribution and nature of work 
performed related to federal credit unions. Thus, principle 3 is 
applied to the majority of this office's work and allocated at 0 
percent insurance related. However, some work the office performs 
involves federally insured state-chartered credit unions, which falls 
under principle 4. The office also addresses share insurance coverage 
matters, which also falls under principle 4.
    The composite rate of this office's insurance-related activities 
calculates as 13 percent as reflected in Table 3. Thus, an allocation 
factor of 13 percent is applied to the office's financial budget in the 
OTR calculation.

            Table 3--Allocation of the Office of Consumer Protection and Financial Access Staff Time
----------------------------------------------------------------------------------------------------------------
                                                                                                   Proportion of
                                                     Number of      Staff time                         staff
                                                    staff (full      spent on       Allocation      insurance-
                    Division                           time         activities        factor       related work
                                                    equivalent)     (full time       (percent)      (full time
                                                                    equivalent)                     equivalent)
----------------------------------------------------------------------------------------------------------------
Administrative..................................               3  ..............  ..............  ..............
    --Principle 3 Activities....................  ..............             2.7               0             0.0
    --Principle 4 Activities....................  ..............             0.3             100             0.3
Consumer Access.................................              20  ..............  ..............  ..............
    -Principle 3 Activities.....................  ..............            15.0               0             0.0
    --Principle 4 Activities....................  ..............             5.0             100             5.0
Consumer Affairs................................              12  ..............  ..............  ..............
    --Principle 3 Activities....................  ..............            11.4               0             0.0
    --Principle 4 Activities....................  ..............             0.6             100             0.6
Consumer Compliance Policy and Outreach.........              10  ..............  ..............  ..............
    --Principle 3 Activities....................  ..............            10.0               0             0.0
    --Principle 4 Activities....................  ..............             0.0             100  ..............
                                                 ---------------------------------------------------------------
        Totals..................................              45  ..............  ..............             5.9
                                                 ---------------------------------------------------------------
            Insurance-Related Full Time                      13%  ..............  ..............  ..............
             Equivalent Staff to Total Staff....
----------------------------------------------------------------------------------------------------------------

    The office's administrative staff provides support for the whole 
office. Ten percent of this unit's work was devoted to supporting 
insurance-related functions, like responding to consumer inquiries on 
share insurance coverage. Thus, principle 4 is applied to those 
activities as 100 percent insurance related while the remaining 90 
percent of their time was spent supporting charting, bylaw, field of 
membership, and related activities, which fall under principle 3 as 0 
percent insurance related.
    The Division of Consumer Access staff spent 25 percent of their 
time addressing insurance-related functions, like insurability 
standards for mergers and insurance applicants where principle 4 
applies. The remainder of this unit's time was spent processing various 
chartering and field of membership expansion applications and bylaw 
matters where principle 3 applies.
    The Division of Consumer Affairs staff spent 5 percent of its time 
addressing share insurance questions received from consumers which 
falls under principle 4. The division spent the remaining 95 percent of 
its time on consumer related activities like administering the 
Financial Literacy Program, which falls under principle 3.
    The Division of Consumer Compliance Policy and Outreach focuses on 
issues related to consumer regulations including implementing the Equal 
Credit Opportunity Act, the Home Mortgage Disclosure Act, the Truth in 
Lending Act, and the Real Estate Settlement Procedures Act. All of 
these activities fall under principle 3; therefore, 100 percent of the 
division's staff time is allocated as 0 percent insurance related.
Office of Small Credit Union Initiatives
    The proposed methodology allocates the cost of the Office of Small 
Credit Union Initiatives based on principles 1 and 2. The office tracks 
the time the Economic Development Specialists spent consulting and 
training both federal credit unions and federally insured state-charted 
credit unions. The proportion of time spent on federal credit unions is 
allocated based on principle 1 while federally insured state-chartered 
credit union work is allocated based on principle 2. Other office 
personnel process grants and loans for both federal credit unions and 
federally insured state-chartered credit unions. Grant and loan 
activities are allocated the same way as the consulting and training 
time using principles 1 and 2. The resulting allocation factor for the 
Office of Small Credit Union Initiatives is 60 percent as shown in 
Tables 4 and 5.\60\
---------------------------------------------------------------------------

    \60\ About 73% of all grants and loans processed by the Office 
of Small Credit Union Initiatives in 2016 were for federal credit 
unions. Of the 18,633 hours budgeted for Economic Development 
Specialist consulting and training, about 81% is for federal credit 
unions.
---------------------------------------------------------------------------

    Table 4 illustrates the allocation for the Office of Small Credit 
Union Initiative's consulting hours between federal and state-chartered 
credit unions applied to the budgeted hours for 2017. Principle 1 is 
applied for federal charters and principle 2 is applied for state 
charters. The result is a composite rate of 59.3 percent insurance-
related hours for the Economic Development Specialists.

[[Page 29947]]



                        Table 4--2017 Economic Development Specialist Workload Allocation
----------------------------------------------------------------------------------------------------------------
                                                                                                    Percent of
                                                                      Percent          Hours          budget
                  Charter type                    Budget (hours)     insurance       insurance       insurance
                                                                      related         related         related
----------------------------------------------------------------------------------------------------------------
Federal Charter.................................          15,185              50           7,592            40.7
State Charter...................................           3,448             100           3,448            18.5
                                                 ---------------------------------------------------------------
    Total.......................................          18,633             N/A          11,040            59.3
----------------------------------------------------------------------------------------------------------------

    Table 5 illustrates the allocation of the grant and loan activities 
performed by the Office of Small Credit Union Initiatives by charter 
type. Principle 1 is applied for federal charters and principle 2 is 
applied for state charters. This results in a composite rate of 63.7 
percent insurance-related activities for grants and loans.
---------------------------------------------------------------------------

    \61\ Numbers may not reconcile exactly due to rounding.

                      Table 5--Grant Approval and Loan Disbursement 2016 by Charter Type 61
----------------------------------------------------------------------------------------------------------------
                                                                      Percent          Total
                  Charter type                     Total grants     insurance-      insurance-      Percent of
                                                     and loans        related         related          total
----------------------------------------------------------------------------------------------------------------
Federal Charter.................................             235              50             118            36.3
State Charter...................................              89             100              89            27.5
                                                 ---------------------------------------------------------------
    Total.......................................             324             N/A             207            63.7
----------------------------------------------------------------------------------------------------------------

    Table 6 shows the resulting overall composite rate of 59.8 percent 
insurance-related activities for the Office of Small Credit Union 
Initiatives. This factor is applied to the financial budget for this 
office in the OTR calculation.

                                   Table 6--Allocation of the Financial Budget
----------------------------------------------------------------------------------------------------------------
                                                                   Insurance- related
                Staff                           Budget                 (percent)            Budget allocation
----------------------------------------------------------------------------------------------------------------
Economic Development Specialists.....                3,733,000                     59.3                2,211,982
Grants and Loans.....................                  527,000                     63.7                  335,881
                                      --------------------------------------------------------------------------
    Total............................                4,260,000                     59.8                2,547,773
----------------------------------------------------------------------------------------------------------------

All Other Offices
    NCUA's remaining offices design or oversee the agency's mission and 
its related offices, or provide necessary support to mission offices or 
the entire agency. As such, the proportion of insurance-related 
activities for these offices corresponds to that of the mission 
offices. It would be administratively burdensome to attempt to account 
for any variation in activity levels from the mission functions, and 
would not result in a material difference in outcomes. Therefore, these 
office costs are allocated based on the weighted average of insurance-
related activities calculated in the subtotal of agency costs for the 
offices above that have a distinct allocation factor. The budgeted 
costs for the following offices are allocated at 60.0 percent 
insurance-related activities for purposes of calculating the OTR:
     NCUA Board,
     Executive Director,
     General Counsel,
     Chief Financial Officer,
     Chief Information Officer,
     Chief Economist,
     Human Resources,
     Examination and Insurance,
     Inspector General,
     Minority and Women Inclusion,
     Public and Congressional Affairs, and
     Continuity and Security Management.

c. Step 3--Calculate the OTR

    The OTR represents the percentage of the NCUA Operating Budget that 
is funded by a transfer from the Share Insurance Fund.\62\ Using the 
result from Step 2, the OTR calculation is shown in Table 7.
---------------------------------------------------------------------------

    \62\ The percentage of actual expenses funded by the Share 
Insurance Fund as they are incurred each month.

                        Table 7--OTR Calculation
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Operating Costs to be Borne by the Share Insurance Fund......     $179.0
/ Total Operating Budget.....................................     $298.2
                                                              ----------
= OTR........................................................      60.0%
------------------------------------------------------------------------

    Based on data used to determine the OTR for 2017, the proposed 
changes to the OTR methodology would result in an OTR of 60.0 percent. 
The current methodology resulted in an OTR of 67.7 percent for 2017. 
Table 8 summarizes the results for the 2017 OTR calculation using the 
current and proposed methodologies.

[[Page 29948]]



                                      Table 8--2017 OTR Results Comparison
----------------------------------------------------------------------------------------------------------------
                                         Current methodology      Proposed methodology         Change \63\
----------------------------------------------------------------------------------------------------------------
OTR Percent..........................                    67.7%                    60.0%                   -7.70%
OTR $ Millions.......................                   $201.8                   $179.0                   -$22.8
----------------------------------------------------------------------------------------------------------------

    For informational purposes only, Table 9 illustrates the portion of 
NCUA's total Operating Budget costs funded explicitly and implicitly by 
federal credit unions and federally insured state-chartered credit 
unions respectively.
---------------------------------------------------------------------------

    \63\ For 2017, the proposed OTR methodology calculation would 
result in a decline of 11.4% from the current methodology.

                                   Table 9--Operating Budget Cost Distribution
----------------------------------------------------------------------------------------------------------------
 Portion of 2017 operating budget                                            Federally insured state-chartered
            covered by:                     Federal credit unions                      credit unions
----------------------------------------------------------------------------------------------------------------
Federal Credit Union Operating Fee  40.0%................................  0.0%.
OTR (proportional based on insured  30.8%................................  29.2%.
 shares).                           (60.0% x 51.3%)......................  (60.0% x 48.7%).
    Total.........................  70.8% \64\...........................  29.2%.
----------------------------------------------------------------------------------------------------------------

    The proposed change to the OTR methodology would result in the 
annual Operating Fee paid by federal credit unions increasing by about 
24%--an increase of $22.8 million from $96.4 million to $119.2 million. 
Based on the 2017 Operating Fee scale, Table 10 provides several 
examples of how a federal credit union's operating fee would increase.
---------------------------------------------------------------------------

    \64\ Based on the current OTR methodology, 67 percent of the 
total 2017 Operating Budget is covered by federal credit unions 
through Operating Fees and the OTR: https://www.ncua.gov/About/Documents/Agenda%20Items/AG204161117Item4a.pdf.

 Table 10--Examples of Operating Fee Increase for Federal Credit Unions
------------------------------------------------------------------------
                                                            Increase to
           Asset size of federal credit union                 annual
                                                           operating fee
------------------------------------------------------------------------
$9.46 billion...........................................        $133,234
$1.01 billion...........................................          51,143
$503 million............................................          25,445
$100 million............................................           5,060
$50 million.............................................           2,526
$10 million.............................................             505
$1 million..............................................               0
------------------------------------------------------------------------

V. Request for Comment

    In addition to the proposed changes to the OTR methodology, the 
Board proposes to formally adopt the following OTR related processes:
     To solicit through the Federal Register public comment on 
the OTR methodology at least every 3 years, and whenever NCUA seeks to 
change the OTR methodology.
     Maintain the staff delegation to administer the OTR 
methodology but require public board briefings every year, no later 
than each December, on the results of the calculation and to post all 
related materials to NCUA's Web site.
     As part of future rulemaking, indicate for any proposed 
regulation involving the activities and authorities of credit unions 
whether the regulation is based on Title I, Title II, and/or Title III 
of the Act and seek comment on this determination. While the proposed 
new OTR methodology would no longer rely on mapping of regulations, 
this will increase clarity regarding the purpose of and authority for 
any new or updated regulations and preserve future flexibility with 
respect to any desired changes to the OTR methodology.
    The Board seeks comments on all the proposed revisions to the OTR 
methodology and formal adoption of the procedures discussed above. In 
particular, the Board is interested in comments on alternative 
approaches to arriving at an allocation factor for the cost of 
examining and supervising federal credit unions (principle 1). For 
example, within the context of the overall simplification of the OTR 
methodology, should federal credit union examination and supervision 
activity be allocated primarily to the operating fee, or should it 
continue to reflect that much of NCUA's examination and supervision 
focus is on managing risk to the Share Insurance Fund.\65\
---------------------------------------------------------------------------

    \65\ To provide context for commenters, an assumption under 
principle 1 in the proposed OTR methodology that only the 
examination and supervision of troubled federal credit unions was 
insurance-related would result in an OTR of about 31 percent. 
Conversely, if the results of the Examiner Time Survey (about 88 
percent insurance-related) were used for the allocation factor for 
principle 1 in the proposed OTR methodology, it would result in an 
OTR of about 85 percent.
---------------------------------------------------------------------------

    Commenters are also encouraged to discuss any other relevant issues 
they believe NCUA should consider with respect to the OTR methodology 
and, to the extent feasible, provide documentation to support any 
recommendations.

    By the National Credit Union Administration Board on June 23, 
2017.
Gerard Poliquin,
Secretary of the Board.
[FR Doc. 2017-13635 Filed 6-29-17; 8:45 am]
 BILLING CODE 7535-01-P



                                                                                  Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices                                                  29935

                                                  without change, in accordance with the                  information collection, unless it is                     OMB Control Number: 1235–0002.
                                                  Paperwork Reduction Act of 1995                         approved by the OMB under the PRA                        Affected Public: Private Sector—
                                                  (PRA). Public comments on the ICR are                   and displays a currently valid OMB                     businesses or other for-profits and
                                                  invited.                                                Control Number. In addition,                           farms.
                                                  DATES: The OMB will consider all                        notwithstanding any other provisions of                  Total Estimated Number of
                                                  written comments that agency receives                   law, no person shall generally be subject              Respondents: 105,587.
                                                  on or before July 31, 2017.                             to penalty for failing to comply with a                  Total Estimated Number of
                                                  ADDRESSES: A copy of this ICR with                      collection of information that does not                Responses: 82,429,923.
                                                  applicable supporting documentation;                    display a valid Control Number. See 5                    Total Estimated Annual Time Burden:
                                                  including a description of the likely                   CFR 1320.5(a) and 1320.6. The DOL                      1,387,659 hours.
                                                  respondents, proposed frequency of                      obtains OMB approval for this                            Total Estimated Annual Other Costs
                                                  response, and estimated total burden                    information collection under Control                   Burden: $3,296,743.
                                                  may be obtained free of charge from the                 Number 1235–0002.                                        Authority: 44 U.S.C. 3507(a)(1)(D).
                                                  RegInfo.gov Web site at http://                           OMB authorization for an ICR cannot
                                                                                                          be for more than three (3) years without                 Dated: June 27, 2017.
                                                  www.reginfo.gov/public/do/
                                                                                                          renewal, and the current approval for                  Michel Smyth,
                                                  PRAViewICR?ref_nbr=201701-1235-002
                                                  (this link will only become active on the               this collection is scheduled to expire on              Departmental Clearance Officer.
                                                  day following publication of this notice)               June 30, 2017. The DOL seeks to extend                 [FR Doc. 2017–13797 Filed 6–29–17; 8:45 am]
                                                  or by contacting Michel Smyth by                        PRA authorization for this information                 BILLING CODE 4510–27–P
                                                  telephone at 202–693–4129, TTY 202–                     collection for three (3) more years,
                                                  693–8064, (these are not toll-free                      without any change to existing
                                                  numbers) or by email at DOL_PRA_                        requirements. The DOL notes that
                                                                                                                                                                 NATIONAL CREDIT UNION
                                                  PUBLIC@dol.gov.                                         existing information collection
                                                                                                                                                                 ADMINISTRATION
                                                     Submit comments about this request                   requirements submitted to the OMB
                                                  by mail to the Office of Information and                receive a month-to-month extension                     Request for Comment Regarding
                                                  Regulatory Affairs, Attn: OMB Desk                      while they undergo review. For                         Revised Overhead Transfer Rate
                                                  Officer for DOL–WHD, Office of                          additional substantive information                     Methodology
                                                  Management and Budget, Room 10235,                      about this ICR, see the related notice
                                                  725 17th Street NW., Washington, DC                     published in the Federal Register on                   AGENCY:  National Credit Union
                                                  20503; by Fax: 202–395–5806 (this is                    November 23, 2016 (81 FR 84619).                       Administration (NCUA).
                                                  not a toll-free number); or by email:                     Interested parties are encouraged to                 ACTION: Request for comment.
                                                  OIRA_submission@omb.eop.gov.                            send comments to the OMB, Office of
                                                  Commenters are encouraged, but not                      Information and Regulatory Affairs at                  SUMMARY:   In a voluntary effort to invite
                                                  required, to send a courtesy copy of any                the address shown in the ADDRESSES                     input from stakeholders, the NCUA
                                                  comments by mail or courier to the U.S.                 section within thirty (30) days of                     Board (Board) is seeking comments on
                                                  Department of Labor-OASAM, Office of                    publication of this notice in the Federal              proposed changes to the Overhead
                                                  the Chief Information Officer, Attn:                    Register. In order to help ensure                      Transfer Rate (OTR) methodology. The
                                                  Departmental Information Compliance                     appropriate consideration, comments                    primary goal of the proposed changes
                                                  Management Program, Room N1301,                         should mention OMB Control Number                      are to reduce the complexity of the OTR
                                                  200 Constitution Avenue NW.,                            1235–0002. The OMB is particularly                     methodology. The proposed changes
                                                  Washington, DC 20210; or by email:                      interested in comments that:                           would also reduce the resources needed
                                                  DOL_PRA_PUBLIC@dol.gov.                                   • Evaluate whether the proposed                      to administer the OTR. This document
                                                                                                          collection of information is necessary                 provides a summary of and response to
                                                  FOR FURTHER INFORMATION CONTACT:
                                                                                                          for the proper performance of the                      comments received on the current OTR
                                                  Michel Smyth by telephone at 202–693–                   functions of the agency, including                     methodology, and explains and solicits
                                                  4129, TTY 202–693–8064, (these are not                  whether the information will have                      comments on the proposed changes to
                                                  toll-free numbers) or by email at DOL_                  practical utility;                                     the OTR methodology.
                                                  PRA_PUBLIC@dol.gov.                                       • Evaluate the accuracy of the                       DATES: Comments must be received on
                                                  SUPPLEMENTARY INFORMATION: This ICR                     agency’s estimate of the burden of the                 or before August 29, 2017 to ensure
                                                  seeks to extend PRA authority for the                   proposed collection of information,                    consideration.
                                                  Disclosures to Workers Under the                        including the validity of the
                                                  Migrant and Seasonal Agricultural                       methodology and assumptions used;                      ADDRESSES:   You may submit comments
                                                  Worker Protection Act (MSPA)                              • Enhance the quality, utility, and                  by any one of the following methods
                                                  information collection. Agricultural                    clarity of the information to be                       (Please send comments by one method
                                                  employers, associations, and farm labor                 collected; and                                         only):
                                                  contractors use this information                          • Minimize the burden of the                           • NCUA Web site: https://
                                                  collection to make MSPA required                        collection of information on those who                 www.ncua.gov/about/pages/board-
                                                  disclosures of employment terms and                     are to respond, including through the                  comments.aspx.
                                                  conditions, wage statements, and                        use of appropriate automated,                            • Email: Address to boardcomments@
                                                  housing terms and conditions to migrant                 electronic, mechanical, or other                       ncua.gov. Include ‘‘[Your name]—
                                                  and seasonal agricultural workers.                      technological collection techniques or                 Comments on OTR Methodology’’ in the
                                                  MSPA section 201 authorizes this                        other forms of information technology,                 email subject line.
mstockstill on DSK30JT082PROD with NOTICES




                                                  information collection. See 29 U.S.C.                   e.g., permitting electronic submission of                • Fax: (703) 518–6319. Use the
                                                  1821.                                                   responses.                                             subject line described above for email.
                                                     This information collection is subject                 Agency: DOL–WHD.                                       • Mail: Address to Gerald Poliquin,
                                                  to the PRA. A Federal agency generally                    Title of Collection: Disclosures to                  Secretary of the Board, National Credit
                                                  cannot conduct or sponsor a collection                  Workers Under the Migrant and                          Union Administration, 1775 Duke
                                                  of information, and the public is                       Seasonal Agricultural Worker Protection                Street, Alexandria, Virginia 22314–
                                                  generally not required to respond to an                 Act.                                                   3428.


                                             VerDate Sep<11>2014   17:32 Jun 29, 2017   Jkt 241001   PO 00000   Frm 00115   Fmt 4703   Sfmt 4703   E:\FR\FM\30JNN1.SGM   30JNN1


                                                  29936                               Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

                                                     • Hand Delivery/Courier: Same as                       other budget-related issues were                       NCUA adopt a method for properly
                                                  mailing address.                                          referred to the appropriate office.                    allocating Operating Budget costs—that
                                                     Public Inspection: You can view all                      Based on the comments and NCUA’s                     is the portion to be funded by
                                                  public comments on NCUA’s Web site                        internal assessment, the Board is                      requisitions from the Share Insurance
                                                  at https://www.ncua.gov/about/pages/                      considering changes to the OTR                         Fund and the portion to be covered by
                                                  board-comments.aspx as submitted,                         methodology.                                           Operating Fees paid by federal credit
                                                  except for those we cannot post for                       Table of Contents                                      unions.6 NCUA has since used an
                                                  technical reasons. NCUA will not edit or                                                                         allocation methodology, known as the
                                                  remove any identifying or contact                         I. Background                                          OTR, to determine how much of the
                                                  information from the public comments                      II. Legal Authority Comments and Responses             Operating Budget to fund with a
                                                  submitted. You may inspect paper                          III. Current OTR Methodology and Process               requisition from the Share Insurance
                                                  copies of comments in NCUA’s                                    Comments and Responses                           Fund.
                                                  headquarters at 1775 Duke Street,                         IV. Details of Proposed OTR Methodology                   NCUA has employed various
                                                                                                            V. Request for Comment                                 allocation methods over the years, with
                                                  Alexandria, Virginia 22314, by
                                                  appointment weekdays between 9 a.m.                       I. Background                                          the current methodology adopted in
                                                  and 3 p.m. To make an appointment,                                                                               2003. For a chronological summary of
                                                                                                               NCUA administers the Federal Credit                 the history of the OTR, refer to
                                                  call (703) 518–6360 or send an email to                   Union Act (the Act), which is comprised
                                                  EIMail@ncua.gov.                                                                                                 Overhead Transfer Rate (OTR)—
                                                                                                            of three Titles: Title I—General                       Timeline at https://www.ncua.gov/
                                                  FOR FURTHER INFORMATION CONTACT:                          Provisions, Title II—Share Insurance,
                                                  Russell Moore or Julie Decker, Loss/Risk                                                                         About/Documents/Budget/
                                                                                                            and Title III—Central Liquidity Facility.              Misc%20Documents/overhead-transfer-
                                                  Analysis Officers, Office of Examination                  The agency’s mission is to ‘‘provide,
                                                  and Insurance, National Credit Union                                                                             rate-chronology.pdf. For a detailed
                                                                                                            through regulation and supervision, a
                                                  Administration, 1775 Duke Street,                                                                                explanation of the current methodology,
                                                                                                            safe and sound credit union system,
                                                  Alexandria, Virginia 22314 or                                                                                    refer to Federal Register—NCUA
                                                                                                            which promotes confidence in the
                                                  telephone: (703) 518–6383 or (703) 518–                                                                          Request for Comment Regarding
                                                                                                            national system of cooperative credit.’’ 2
                                                  6384.                                                                                                            Overhead Transfer Rate Methodology at
                                                                                                            This includes protecting member rights
                                                                                                                                                                   https://www.federalregister.gov/
                                                  SUPPLEMENTARY INFORMATION: NCUA                           and deposits. Specifically, NCUA
                                                                                                                                                                   documents/2016/01/27/2016-01626/
                                                  requested comments on the current OTR                     charters, regulates, and insures shares in
                                                                                                                                                                   request-for-comment-regarding-
                                                  methodologies and processes through a                     federal credit unions and insures shares
                                                                                                                                                                   overhead-transfer-rate-methodology.
                                                  notice in the Federal Register published                  and deposits in federally insured state-
                                                  on January 27, 2016.1 Areas the Board                     chartered credit unions through the                    II. Legal Authority Comments and
                                                  specifically sought comments on                           National Credit Union Share Insurance                  Responses
                                                  included:                                                 Fund (Share Insurance Fund).                              The Board detailed the legal
                                                     • Whether the OTR should continue                         NCUA is responsible for ensuring
                                                                                                                                                                   parameters within which it must fund
                                                  to be determined using a formula-driven                   federally insured credit unions operate
                                                                                                                                                                   the NCUA Operating Budget in the
                                                  approach, or instead be set largely at the                safely and soundly and comply with all
                                                                                                                                                                   January 2016 notice and request for
                                                  discretion of the Board;                                  applicable laws and regulations within
                                                                                                                                                                   comment.7 While the Board did not
                                                     • the definition NCUA uses for                         NCUA’s jurisdiction.3 In so doing, the
                                                                                                                                                                   expressly solicit comments on said
                                                  insurance-related activities;                             agency mitigates risk to the Share
                                                                                                                                                                   authorities, a number of comments
                                                     • adjustments or changes to the                        Insurance Fund and prevents taxpayer-
                                                                                                                                                                   addressed NCUA’s legal authority.
                                                  current calculation; and                                  funded bailouts.
                                                                                                               To achieve its statutory mission, the               Below the Board restates the legal
                                                     • alternate methodologies to arrive at                                                                        parameters outlined in the January 2016
                                                  an accurate and fair allocation of costs.                 agency incurs various expenses,
                                                                                                            including those involved in examining                  notice. Within these parameters, NCUA
                                                     Within the 90-day comment period,                                                                             has developed a new OTR methodology
                                                  NCUA received 40 comment letters on                       and supervising federally insured credit
                                                                                                            unions. The Board adopts an Operating                  proposed in this publication that
                                                  the OTR methodology. The commenters                                                                              continues to ensure application that is
                                                  included federally insured state-                         Budget each year to fund the vast
                                                                                                            majority of the costs of operating the                 fair to both federal credit unions and
                                                  chartered credit unions, national credit                                                                         federally insured state-chartered credit
                                                  union trade organizations, state leagues,                 agency.4 The Act authorizes two
                                                                                                            primary sources to fund the Operating                  unions, and that is consistent across all
                                                  and state supervisory authorities. There                                                                         of NCUA’s cost centers.
                                                  were no comment letters received from                     Budget: (1) Requisitions from the Share
                                                  federal credit unions. While there were                   Insurance Fund; and (2) Operating Fees                 a. Legal Authority
                                                  only 40 comment letters, the comments                     charged to federal credit unions.5
                                                                                                               In 1972, the Government                                NCUA charters, regulates and insures
                                                  addressed a broad range of complex                                                                               shares in federal credit unions and
                                                                                                            Accountability Office recommended
                                                  issues. In addition to reviewing                                                                                 insures shares and deposits in federally
                                                  comments for input on the existing                          2 https://www.ncua.gov/About/Pages/Mission-          insured state-chartered credit unions.
                                                  approach, NCUA staff explored options                     and-Vision.aspx.                                       To cover expenses related to its
                                                  for the Board to consider for improving                     3 In coordination with State Supervisory             statutory mission, the Board adopts an
                                                  the OTR methodology. Many of the                          Authorities with respect to federally insured state-   Operating Budget in the fall of each
                                                  comment letters discussed the                             chartered credit unions.
                                                                                                              4 Some costs are directly charged to the Share
                                                                                                                                                                   year. The Act authorizes two primary
                                                  methodologies for both the OTR and the                                                                           sources to fund the Operating Budget:
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                                                                                                            Insurance Fund or the Temporary Corporate Credit
                                                  Operating Fee as well as other budget-                    Union Stabilization Fund when appropriate to do        (1) Requisitions from the Share
                                                  related issues. This request for                          so. For example, costs for training and equipment      Insurance Fund ‘‘for such
                                                  comments focuses specifically on the                      provided to State Supervisory Authorities are          administrative and other expenses
                                                                                                            directly charged to the Share Insurance Fund.
                                                  OTR methodology. Comments related to                        5 Other sources of funding for the Operating
                                                                                                                                                                   incurred in carrying out the purposes of
                                                  the Operating Fee methodology and                         Budget include interest income, funds from
                                                                                                                                                                    6 http://www.gao.gov/assets/210/203181.pdf.
                                                                                                            publication sales, parking fee income, and rental
                                                    1 81   FR 4804 (Jan. 27, 2016).                         income.                                                 7 81   FR 4804 (Jan. 27, 2016).



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                                                                                   Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices                                                       29937

                                                  [Title II of the Act] as [the Board] may                 (APA).13 The Board believes the existing                provisions to only accrue to the Share
                                                  determine to be proper’’; 8 and (2) ‘‘fees               OTR and this proposal are fully                         Insurance Fund as discussed below.
                                                  and assessments (including income                        consistent with the APA and all other                      Multiple commenters stated that the
                                                  earned on insurance deposits) levied on                  applicable law.14                                       plain language of the Act requires the
                                                  insured credit unions under [the Act].’’ 9                                                                       Board to structure examinations and
                                                  Among the fees levied under the Act are                  b. Comments                                             Call Reports originally required under
                                                  annual Operating Fees, which are                                                                                 Title I so they may be used for Title II
                                                                                                              In response to its initial OTR notice,
                                                  required for federal credit unions under                                                                         share insurance purposes.16 These
                                                                                                           NCUA received a variety of comments
                                                  12 U.S.C. 1755 ‘‘and may be expended                                                                             commenters similarly stated that the Act
                                                                                                           related to the legal authority to
                                                  by the Board to defray the expenses                                                                              places requirements on NCUA to use
                                                                                                           requisition funds from the Share
                                                  incurred in carrying out the provisions                                                                          state regulator examinations and reports
                                                                                                           Insurance Fund to cover a portion of the
                                                  of [the Act,] including the examination                                                                          to the maximum extent feasible.17 In
                                                                                                           Operating Budget. Several commenters                    response, the Board notes that Title II,
                                                  and supervision of [federal credit
                                                                                                           stated the agency does not have                         in 12 U.S.C. 1781(b)(2), authorizes
                                                  unions].’’ Taken together, these dual
                                                                                                           authority or discretion to establish and                examinations as needed for the
                                                  primary funding authorities effectively
                                                  require the Board to determine which                     determine the OTR. Some commenters                      protection of the Share Insurance Fund
                                                  expenses are appropriately paid from                     asserted that NCUA lacks the legal                      and other credit unions in addition to
                                                  each source while giving the Board                       authority to use the Share Insurance                    those permitted under Title I,
                                                  broad discretion in allocating these                     Fund to cover costs of operating the                    recognizing that the scope and timing of
                                                  expenses.                                                agency. Other commenters claimed                        Title I examinations does not
                                                     To allocate agency expenses between                   NCUA has only very narrow authority to                  necessarily satisfy share insurance
                                                  these two primary funding sources,                       allocate costs, has too broadly                         needs under Title II. Regardless of the
                                                  NCUA uses the OTR. The OTR                               interpreted its authority, and may assign               parsing of the various statutory
                                                  represents the formula NCUA uses to                      to the Share Insurance Fund only those                  provisions on this point, the Board is
                                                  allocate insurance-related expenses to                   costs directly associated with share                    careful to build efficiencies wherever
                                                  the Share Insurance Fund under Title II.                 insurance payments for failed or                        reasonable in light of NCUA’s dual roles
                                                  Almost all other operating expenses are                  troubled credit unions. Some                            as (1) charterer and prudential regulator
                                                  collected through annual Operating Fees                  commenters insisted NCUA is required                    of federal credit unions and (2) insurer
                                                  paid by federal credit unions.10 Two                     to fund the vast majority of the cost of                of federal credit unions and federally
                                                  statutory provisions directly limit the                  operating the agency through Operating                  insured state-chartered credit unions.
                                                  Board’s discretion with respect to Share                 Fees charged to federal credit unions,                  Efficiencies gained from NCUA’s dual
                                                  Insurance Fund requisitions for NCUA’s                   claiming Congress intended that                         role provide cost savings and help avoid
                                                  Operating Budget and, hence, the OTR.                    Operating Fees were to subsidize costs                  subjecting credit unions to the burden of
                                                  First, expenses funded from the Share                    in managing risk to the Share Insurance                 redundant examinations. Further, the
                                                  Insurance Fund must carry out the                        Fund. Having considered these                           Act’s provisions on cost savings do not
                                                  purposes of Title II of the Act, which                   comments, NCUA maintains that a plain                   prohibit NCUA from allocating
                                                  relate to share insurance.11 Second,                     reading of the Act, as described in                     insurance-related operating expenses to
                                                  NCUA may not fund its entire Operating                   section II.a. above and in the January                  the Share Insurance Fund through the
                                                  Budget through charges to the Share                      2016 notice, supports the agency’s legal                OTR under 12 U.S.C. 1783(a).
                                                  Insurance Fund.12 NCUA has not                           authority and broad discretion in                       Specifically, 12 U.S.C. 1781(b)(1)
                                                  imposed additional policy or regulatory                  allocating operating costs.                             requires NCUA to adjust the way it
                                                  limitations on its discretion for                           Various commenters disagreed with                    conducts examinations of federal credit
                                                  determining the OTR. If NCUA’s OTR                       the agency’s legal analysis and argued                  unions so they may be ‘‘utilized for
                                                  methodology were challenged, the court                   that some combination of 12 U.S.C.                      share insurance purposes.’’ This
                                                  would uphold NCUA’s methodology                          1781(b)(1), 1782(a)(5), and 1790 also                   provision does result in cost savings.
                                                  unless it were shown to be arbitrary or                  limit NCUA’s requisition of funds from                  However, it does not preclude NCUA
                                                  capricious, contrary to law, or                          the Share Insurance Fund for the                        from allocating the costs of the ‘‘share
                                                  unsupported by statutory authority                       Operating Budget. Several commenters                    insurance purposes’’ portion of federal
                                                  under the Administrative Procedure Act                   went further and argued that Title II’s                 credit union examinations to the Share
                                                                                                           legislative history indicates the savings               Insurance Fund.18 The Board thus
                                                    8 12  U.S.C. 1783(a).
                                                                                                           from NCUA’s reliance on Title I and                     disagrees with commenters that argued
                                                    9 12  U.S.C. 1766(j)(3). Other sources of income for
                                                                                                           State Supervisory Authority                             that the Act requires the cost-savings of
                                                  the Operating Budget include interest income,
                                                  funds from publication sales, parking fee income,        examinations and reports should accrue                  NCUA’s dual roles to accrue specifically
                                                  and rental income.                                       to the benefit of the Share Insurance                   to the Share Insurance Fund.
                                                     10 Annual Operating Fees must ‘‘be determined
                                                                                                           Fund. The Act’s plain language does not                    While the Board did not cite 12 U.S.C.
                                                  according to a schedule, or schedules, or other
                                                                                                           require an analysis of the legislative                  1790 as an additional limitation in its
                                                  method determined by the NCUA Board to be                                                                        earlier notice, the Board agrees with
                                                  appropriate, which gives due consideration to the        history.15 Even if legislative history was
                                                  expenses of the [NCUA] in carrying out its                                                                       commenters stating that this provision
                                                                                                           applicable in this case, the plain reading
                                                  responsibilities under the [Act] and to the ability of                                                           should inform NCUA’s interpretation of
                                                  [FCUs] to pay the fee.’’ 1755(b). The NCUA Board’s
                                                                                                           of the Act is consistent with the
                                                                                                                                                                   Title II so that it consciously avoids
                                                  methodology for determining the aggregate amount         legislative history and does not support
                                                                                                                                                                   discrimination against federally insured
                                                  of Operating Fees was discussed in a separate            commenters’ interpretation that
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                                                  Federal Register publication.                            Congress intended costs savings
                                                     11 12 U.S.C. 1783(a).                                                                                           16 12    U.S.C. 1781(b)(1), 1782(a)(5).
                                                     12 The Act in 12 U.S.C. 1755(a) states, ‘‘[i]n                                                                  17 Id.
                                                                                                             13 5U.S.C. 706(2).                                      18 With respect to call reports and other ongoing
                                                  accordance with rules prescribed by the Board, each
                                                                                                             14 See, e.g., Motor Vehicle Mfrs. Ass’n of United
                                                  [federal credit union] shall pay to the [NCUA] an                                                                reports submitted by federally insured credit
                                                  annual operating fee which may be composed of            States, Inc. v. State Farm Mut. Automobile Ins. Co.,    unions, 12 U.S.C. 1782(a)(5) is also a cost savings
                                                  one or more charges identified as to the function or     463 U.S. 29 (1983).                                     provision but does not preclude allocating
                                                  functions for which assessed.’’ See also 12 U.S.C.         15 See, e.g., Barnhart v. Sigmon Coal Co., 534 U.S.   insurance-related costs of the applicable data
                                                  1766(j)(3).                                              438, 450 ((2002).                                       collections to the Share Insurance Fund.



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                                                  29938                            Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

                                                  state-chartered credit unions to the                     provides the Board with a number of                      Finally, a number of commenters
                                                  benefit of federal credit unions.19                      specific authorities that relate to costs              argued that the OTR methodology and/
                                                  However, the Board does not believe                      NCUA incurs in carrying out its                        or calculations either should or must go
                                                  that either the current or the proposed                  obligations under Title II. For instance,              through full APA notice and comment
                                                  OTR process discriminates against                        Title II of the Act authorizes the Board               rulemaking. The APA does not require
                                                  federally insured state-chartered credit                 ‘‘to appoint examiners who shall have                  notice and comment for the OTR
                                                  unions or federal credit unions to the                   the power, on its behalf, to examine any               methodology. The legal analysis of
                                                  benefit of the other.                                    insured credit union . . . whenever in                 NCUA’s Office of General Counsel on
                                                    As background, all federally insured                   the judgment of the Board an                           the applicability of the notice and
                                                  credit unions are subject to the same                    examination is necessary to determine                  comment provisions of the APA to the
                                                  requirements for funding the Share                       the condition of any such credit union                 OTR methodology is summarized in the
                                                  Insurance Fund. Specifically,                            for insurance purposes.’’ 20 Further,                  January 2016 OTR notice 28 and
                                                  § 1782(c)(1)(A)(i) requires that ‘‘[e]ach                Title II authorizes the Board to                       articulated more fully in a legal opinion
                                                  insured credit union shall pay to and                    implement regulations applicable to all                posted on NCUA’s Web site.29 In
                                                  maintain with the [Share Insurance                       insured credit unions to address risk to               soliciting comment on the OTR through
                                                  Fund] a deposit in an amount equaling                    the Share Insurance Fund. Title II states              the Federal Register NCUA has gone,
                                                  1 per centum of the credit union’s                       the Board may ‘‘prescribe such rules                   and continues to go, beyond its APA
                                                  insured shares.’’ Section 1782(c)(2)(A)                  and regulations as it may deem                         obligations.
                                                  requires that ‘‘[e]ach insured credit                    necessary and appropriate to carry out
                                                  union shall, at such times as the Board                  the provisions of this subchapter.’’ 21                III. Current OTR Methodology and
                                                  prescribes (but not more than twice in                   Title II also grants the Board the                     Process Comments and Responses
                                                  any calendar year), pay to the Fund a                    following additional authorities relevant              a. Formula Driven or Set at the
                                                  premium charge for insurance in an                       to agency operating costs:                             Discretion of the Board
                                                  amount stated as a percentage of insured                    • ‘‘Appoint such officers and
                                                  shares (which shall be the same for all                  employees as are not otherwise                            The majority of commenters
                                                  insured credit unions).’’ Thus, in                       provided for in this chapter;’’ 22                     expressed support for NCUA’s
                                                  funding the Share Insurance Fund,                           • ‘‘employ experts and consultants or               continued use of a formula to determine
                                                  federal credit unions and federally                      organizations thereof;’’ 23                            the OTR. The Board agrees NCUA
                                                  insured state-chartered credit unions are                   • ‘‘prescribe the manner in which its               should continue to use a formula to
                                                  not treated any differently. Similarly,                  general business may be conducted and                  determine the OTR. Use of a well-
                                                  the requisitions from the Share                          the privileges granted to it by law may                designed and comprehensive formula
                                                  Insurance Fund used to fund the                          be exercised and enjoyed;’’ 24                         represents a good faith effort to consider
                                                  insurance-related expenses of NCUA’s                        • ‘‘exercise all powers specifically                all of the agency’s costs relative to how
                                                  Operating Budget under § 1783(a) do not                  granted by the provisions of this                      NCUA is carrying out its various
                                                  distinguish between federal credit                       subchapter and such incidental powers                  responsibilities. A formula also helps
                                                  unions and federally insured state-                      as shall be necessary to carry out the                 ensure costs assigned to the OTR relate
                                                  chartered credit unions.                                 power so granted;’’ 25 and                             to agency activities to carry out Title II
                                                    As for the OTR methodology and                            • ‘‘make examinations of and require                responsibilities. NCUA’s goal in using a
                                                  whether it complies with § 1790, the                     information and reports from insured                   formula-driven OTR methodology is to
                                                  OTR methodology only considers the                       credit unions, as provided in this                     provide a comprehensive, fair, and
                                                  type of activity (i.e. insurance-related or              subchapter.’’ 26                                       equitable allocation of costs within a
                                                  not) and treats the expenses related to                     The Board concludes that these                      framework that can be administered at
                                                  that activity the same regardless of the                 authorities taken together provide                     a relatively low cost. Though it is
                                                  type of charter to which the activity                    NCUA as insurer with broad discretion                  formula driven, the Board can adjust the
                                                  applies. Specifically, both the existing                 to impose regulations on and examine                   methodology at any time to ensure it
                                                  and proposed OTR methodologies                           all insured credit unions. In addition,                continues to reflect the most equitable
                                                  provide that all insurance-related                       the cost of the agency activities                      and suitable approach to allocating
                                                  expenses are funded from the Share                       associated with exercising these and                   costs.
                                                  Insurance Fund, regardless of charter                    other accompanying authorities can                        However, five commenters favored
                                                  type.                                                    properly be considered costs of carrying               setting the OTR at a fixed 50 percent of
                                                    The Act clearly permits expenses                       out Title II of the Act.27
                                                                                                                                                                     28 81 FR 4804 (Jan. 27, 2016) (‘‘Since its
                                                  related to insurance to be funded by the
                                                                                                             20 12  U.S.C. 1784(a).                               inception, NCUA has taken the position that the
                                                  Share Insurance Fund regardless of                                                                              OTR is not a legislative rule under the
                                                                                                              21 12 U.S.C. 1789(a)(11).
                                                  charter. Specifically, 12 U.S.C. 1783(a)                                                                        Administrative Procedure Act (APA) and is,
                                                                                                              22 12 U.S.C. 1789(a)(4).
                                                  expressly allows expenses ‘‘incurred in                     23 12 U.S.C. 1789(a)(5).
                                                                                                                                                                  therefore, exempt from notice and comment
                                                  carrying out the purposes of [Title II]’’                                                                       rulemaking processes. [ ] As such, NCUA has never
                                                                                                              24 12 U.S.C. 1789(a)(6).
                                                                                                                                                                  used notice and comment rulemaking to establish
                                                  to be allocated to the Share Insurance                      25 12 U.S.C. 1789(a)(7).
                                                                                                                                                                  either an individual determination of the OTR or
                                                  Fund. The costs NCUA incurs in                              26 12 U.S.C. 1789(a)(8).                            the general methodology used to calculate the OTR.
                                                  safeguarding the Share Insurance Fund                       27 For example, Title II specifically addresses a   However, the OTR has been explained, discussed,
                                                  relate to the risks in federal credit                    broad range of standards for all insured credit        and reviewed in various public records, including
                                                                                                           unions, including standards for insurance against      in annual Board Action Memorandums related to
                                                  unions and federally insured state-                                                                             budget matters, independent evaluations, and other
                                                                                                           burglary and defalcation, loss reserve requirements,
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                                                  chartered credit unions. The Act                         investment limitations, ongoing reporting              documents available in public records and on
                                                                                                           requirements (such as the Call Report), independent    NCUA’s Web site.[ ] Beyond its APA obligations, the
                                                    19 12 U.S.C. 1790 (‘‘It is not the purpose of this     audits, accounting principles, national flood          Board has chosen to solicit public comments on the
                                                  subchapter to discriminate in any manner against         insurance program requirements, liquidity capacity,    OTR processes and methodologies through this
                                                  State-chartered credit unions and in favor of            unsafe and unsound conditions or practices,            Federal Register publication.’’).
                                                  Federal credit unions, but it is the purpose of this     security standards, recordkeeping, monetary               29 NCUA’s legal analysis with respect to the OTR

                                                  subchapter to provide all credit unions with the         transaction and recordkeeping and reporting,           and APA process is available at the following Web
                                                  same opportunity to obtain and enjoy the benefits        benefits to institution affiliated parties, capital    page: https://www.ncua.gov/Legal/Documents/
                                                  of this subchapter.’’).                                  standards, and approval of officials.                  Opinion/OL2015-0818.pdf.



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                                                                                  Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices                                                     29939

                                                  the Operating Budget. Commenters that                   approved formula, instead of an explicit               OTR methodology. While still formula
                                                  supported setting the OTR at 50 percent                 Board vote each year, helps avoid any                  driven, the proposed changes to the
                                                  indicated that it is easily                             perception that the agency would                       methodology would provide for a
                                                  understandable, more in line with the                   casually override the calculation in                   simpler approach that remains
                                                  dual functions of NCUA as regulator                     setting the OTR. At any time, any Board                comprehensive, fair, and equitable. The
                                                  and insurer, and that the OTR was set                   member may request a Board vote be                     proposed changes to the methodology
                                                  at 50 percent for many years. The Board                 scheduled to change the OTR                            are described in detail in section IV of
                                                  does not believe it is transparent or                   methodology, or to change the OTR                      this document.
                                                  appropriate to set the OTR at any level,                from the calculated result.
                                                                                                             The delegation has not resulted in a                d. Definition of Insurance-Related
                                                  such as the 50 percent recommended by
                                                                                                                                                                 Activities
                                                  commenters, without a reasoned basis to                 reduction in transparency. As was done
                                                  demonstrate that level of agency                        prior to the delegation, each year staff                  NCUA’s definition of insurance-
                                                  operating costs are properly allocated to               submits a report to the Board on the                   related activities received the most
                                                  Title II activities.30 However, the Board               results of the calculation and conducts                comments. Of the 36 commenters on
                                                  agrees that the OTR methodology can be                  a briefing at a public Board meeting.                  this topic, most disagree with the
                                                  simplified and maintain a sufficient                    The materials supporting the OTR                       definition NCUA uses for insurance-
                                                  degree of comprehensiveness to ensure                   calculation and the result are provided                related activities. Many commenters
                                                  it is equitable. Such a simplification                  as part of the public Board briefing and               objected to equating ‘‘safety and
                                                  should improve understanding of the                     posted on the agency’s Web site. The                   soundness’’ with ‘‘insurance-related,’’
                                                  OTR and reduce administrative costs.                    Board intends for this public reporting                with some arguing that the charterer/
                                                  For a discussion of how the Board                       to continue. Further, the Board is                     prudential regulator cares about safety
                                                  proposes to simplify the OTR                            committed to soliciting public input at                and soundness and it is therefore not
                                                  methodology, see section IV.                            least every three years on the OTR                     the sole domain of the insurer.
                                                                                                          methodology, and any time a change to                  Commenters asserted the definition
                                                  b. Delegation of the OTR Calculation to                                                                        assumes that NCUA has no safety and
                                                  NCUA Staff                                              the methodology is considered.
                                                                                                                                                                 soundness oversight in its role as
                                                     Ten commenters objected to the                       c. Transparency                                        regulator and charterer of federal credit
                                                  Board’s delegation of the OTR                              Nine commenters stated that the                     unions. By doing so, commenters claim
                                                  calculation to NCUA staff. They argued                  current OTR methodology is not                         NCUA is shifting expenses that should
                                                  that by doing so the Board abdicated its                sufficiently transparent. NCUA has                     fall under the operating fee paid by
                                                  oversight and discretion over the OTR                   made various efforts over the years to be              federal credit unions to the Share
                                                  and that it will result in reduced                      transparent with respect to the OTR,                   Insurance Fund.
                                                  transparency. During the November 29,                   and recently published extensive                          NCUA recognizes the historical role of
                                                  2015, Board meeting, the Board                          information about the OTR. The setting                 a charterer/prudential regulator involves
                                                  approved the delegation of authority to                 of the OTR has been briefed and acted                  enforcing laws and implementing public
                                                  administer the Board approved OTR                       on each year at a public Board meeting.                policy. Before the advent of federal
                                                  methodology to the Director of the                      The associated Board Action                            deposit insurance, federal financial
                                                  Office of Examination and Insurance                     Memorandums, which are public                          institution regulators were concerned
                                                  (E&I).31                                                records, fully detailed the calculation                with protecting the stability of the
                                                     Delegating the ministerial application               and included supporting materials. The                 financial system by ‘‘regulating’’ it.
                                                  of the Board approved OTR                               current methodology was extensively                    Thus, financial institution examinations
                                                  methodology does not mean the Board                     reviewed at a public Board meeting                     focused on ensuring (1) statutes and
                                                  has abdicated its oversight and                         when adopted in 2003. All related                      regulations were followed to protect
                                                  discretion for the OTR. With limited                    materials have been made a matter of                   consumers, and (2) institutions were
                                                  exceptions not at play here, the Act                    public record and posted on NCUA’s                     viable to protect consumer deposits,
                                                  permits the Board to ‘‘delegate to any                  Web site. Numerous analyses,                           preserve access to financial services,
                                                  officer or employee of the                              independent evaluations, and other                     and safeguard the stability of the
                                                  Administration such of its functions as                 documents are available in public                      economy. Though not responsible for
                                                  it deems appropriate.’’ 32 Further, the                 records and on NCUA’s Web site. To                     the financial liability that comes with
                                                  current delegation to staff to administer               improve transparency further, the                      the role of insurer, prudential regulators
                                                  the OTR does not provide staff with the                 agency organized and posted a variety of               are concerned with potential threats to
                                                  power to change the methodology for                     new and historical materials on its Web                the viability of their financial
                                                  calculating the OTR. Rather it mirrors                  site in 2015.33 Additionally, the January              institutions to protect consumers and
                                                  the typical organizational separation of                27, 2016, request for comment regarding                their jurisdiction’s economy. This focus
                                                  duties where the board sets policy and                  the OTR methodology provided detailed                  on viability benefits the insurer, whose
                                                  staff implements the policy. The Board                  explanations for the processes and                     primary role is to protect depositors and
                                                  retains approval authority over the                     methodology related to calculating the                 the taxpayer and contribute to the
                                                  methodology that is used to calculate                                                                          stability of the financial system.
                                                                                                          OTR. Although all information related
                                                  the OTR; only the Board can change the                                                                            NCUA has a unique dual role in that
                                                                                                          to the OTR calculation is publicly
                                                  OTR methodology or use its discretion                                                                          it serves as both the regulator of federal
                                                                                                          available already, the Board
                                                  to change the OTR from the calculated                                                                          credit unions and the insurer of all
                                                                                                          acknowledges that an obstacle to
                                                  result if circumstances so warranted.
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                                                                                                          transparency is the complexity of the                  federally insured credit unions.34
                                                  However, having the OTR set by a Board
                                                                                                          methodology itself. In an effort to
                                                                                                                                                                   34 The Office of the Comptroller of the Currency
                                                    30 See 12 U.S.C. 1783(a).
                                                                                                          address the transparency concern, the
                                                                                                                                                                 (OCC) charters, regulates, and supervises all
                                                    31 NCUA Board Action Bulletin found at the            Board is considering simplifying the                   national banks and federal savings associations as
                                                  following web address: https://www.ncua.gov/                                                                   well as federal branches and agencies of foreign
                                                  About/Pages/board-actions/bulletins/2015/                 33 Materials related to the OTR can be found at      banks. On its Web site, the OCC lists its mission as
                                                  november/BAB20151119.aspx.                              www.ncua.gov/About/Pages/budget-strategic-             ensuring that national banks and federal savings
                                                    32 12 U.S.C. 1789(a)(10); see also 1766(d).           planning/supplementary-materials.aspx.                                                             Continued




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                                                  29940                            Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

                                                  Congress established the Share                           focuses on the primary motivation for                     soundness, the Board is considering
                                                  Insurance Fund and assigned its                          the regulation or examination and                         adjusting the OTR methodology so
                                                  administration to the Board.35 This                      supervision activity. The motivation for                  safety and soundness is not accounted
                                                  arrangement has a variety of benefits. A                 insurance-related regulations and                         for as the primary domain of the insurer.
                                                  regulator/supervisor with insurance                      examination activities is based on the                    For more information on the proposed
                                                  responsibility creates a strong alignment                nature of the threat to the viability of the              change to the OTR methodology, see
                                                  of incentives in preserving safety and                   institution, and therefore potential                      section IV.
                                                  soundness, thereby managing risk to the                  losses to the Share Insurance Fund. The                      One commenter stated that routine
                                                  Share Insurance Fund. The appropriate                    insurance-related definition excludes                     examinations of all insured credit
                                                  combination of functions reduces the                     procedures that assess compliance with                    unions should be paid through
                                                  likelihood that a regulator would act                    other regulations. Consumer protection                    Operating Fees. Another commenter
                                                  without adequate regard for the                          and other laws and regulations (such as                   asserted that the OTR should only be
                                                  insurance implications. It also generally                field of membership rules) designed to                    used for examinations of federally
                                                  avoids additional and duplicative                        otherwise govern how credit unions                        insured state-chartered credit unions
                                                  oversight costs, and the corresponding                   operate, and related examination                          and examinations of troubled federal
                                                  burden on insured institutions of                        activities, are not primarily intended to                 credit unions. These recommendations
                                                  separate requirements and supervision                    reduce the potential for losses to the                    assume that as insurer, NCUA takes
                                                  from a different regulator and insurer.                  Share Insurance Fund. Moreover, while                     only a reactive approach to managing
                                                     Given its multiple roles, NCUA                        systemic and egregious violations of                      risk to the Share Insurance Fund.
                                                  appropriately allocates costs associated                 such laws could result in material fines                     The Board notes that NCUA’s role as
                                                  with activities connected to each role.                  to the institution, such occasions are                    insurer is best fulfilled by a proactive
                                                  Various provisions of the Act, as noted                  very infrequent and rarely result in the                  approach to preventing losses, not just
                                                  earlier, govern or inform this allocation.               failure of the institution or losses to the               addressing troubled or failed
                                                  Thus, NCUA currently categorizes those                   Share Insurance Fund.                                     institutions. Since the implementation
                                                  activities designed to manage risk to the                   Thus, NCUA currently allocates costs                   of federal share insurance in 1970, the
                                                  Share Insurance Fund as ‘‘insurance-                     associated with regulating and                            Board has instituted a more proactive
                                                  related.’’ This includes activities                      examining the safety and soundness of                     examination and supervision program
                                                  designed to enforce regulations NCUA                     insured institutions as insurance-                        geared toward safety and soundness to
                                                  adopts to carry out the purpose of Title                 related. Worthy of note, Congress uses                    better manage risk to the Share
                                                  II (Share Insurance) as well as related                  ‘‘safety and soundness’’ and related                      Insurance Fund. Additionally, as credit
                                                  examination and supervision                              terminology in the Act.37 There are two                   unions have become larger and more
                                                  activities.36 NCUA’s categorization                      subjects in Title I containing safety and                 complex, the risks to the Share
                                                                                                           soundness terminology: the interest rate                  Insurance Fund have changed, with
                                                  associations operate in a safe and sound manner,         ceiling for federal credit unions (12                     NCUA making corresponding adaptions
                                                  provide fair access to financial services, treat         U.S.C. 1757(5)(A)(vi)(I)) and provisions
                                                  customers fairly, and comply with applicable laws                                                                  to its operations. In 2002, the Board
                                                  and regulations. Similarly, the Board of Governors
                                                                                                           regarding multiple common bond                            strengthened its commitment to
                                                  of the Federal Reserve System has supervisory and        groups (12 U.S.C. 1759(d) and 12 U.S.C.                   fulfilling NCUA’s role as insurer by
                                                  regulatory authority over a wide range of financial      1759(f)). The current safety and                          implementing the Risk-Focused
                                                  institutions, including state-chartered banks that are   soundness language applying to these
                                                  members of the Federal Reserve System, bank                                                                        Examination Program. As recently as
                                                                                                           two subjects in Title I was added after
                                                  holding companies, thrift holding companies and                                                                    2016, the Board made the examination
                                                  foreign banking organizations that have a branch,        Title II was enacted. There are 19
                                                                                                                                                                     program even more risk-based by
                                                  agency, a commercial lending company subsidiary          references to safety and soundness in
                                                                                                                                                                     adopting an extended examination cycle
                                                  or a bank subsidiary in the United States. On its        Title II. These provisions cover a range
                                                  Web site, the Federal Reserve states its mission is                                                                for healthy, well-run credit unions.
                                                                                                           of subjects.38 In particular, NCUA’s
                                                  to provide the nation with a safer, more flexible,                                                                 These programs base examination scope
                                                  and more stable monetary and financial system.           various enforcement authorities for
                                                                                                                                                                     and timing largely on the risks an
                                                  One of its four stated general duties is supervising     violations of laws or regulations and
                                                                                                                                                                     institution poses to the Share Insurance
                                                  and regulating banking institutions to ensure the        unsafe or unsound conditions or
                                                  safety and soundness of the nation’s banking and                                                                   Fund. Further, the objective of the risk-
                                                                                                           practices are contained in Title II. Thus,
                                                  financial system and to protect the credit rights of                                                               focused examination is to enable NCUA
                                                  consumers. On its Web site, the Federal Deposit          most of Congress’ focus on safety and
                                                                                                           soundness in the Act is in the context                    to identify and address risks before they
                                                  Insurance Corporation states its mission is to
                                                  maintain stability and public confidence in the          of share insurance.                                       become a major problem. All of these
                                                  nation’s financial system by insuring deposits,             However, NCUA acknowledges that                        changes have resulted in an increase in
                                                  examining and supervising financial institutions for
                                                                                                           safety and soundness is not the sole                      the agency’s insurance-related activities.
                                                  safety and soundness and consumer protection,                                                                         The Act and NCUA Regulations have
                                                  making large and complex financial institutions          domain of the insurer; prudential
                                                  resolvable, and managing receiverships.                  regulators have various responsibilities                  also evolved, resulting in more
                                                     35 12 U.S.C. 1782, 1783.
                                                                                                           with respect to the ‘‘safety and                          emphasis on safeguarding the Share
                                                     36 As noted in the Legal Authority section, NCUA
                                                                                                           soundness’’ of institutions they oversee.                 Insurance Fund. For example:
                                                  has the authority to promulgate rules and
                                                                                                           In some respects this is recognized in                       1. The Credit Union Membership
                                                  regulations to carry out the purpose of Title II—                                                                  Access Act was enacted into law in
                                                  Share Insurance. Accordingly, the NCUA Board has         the current OTR formula through the
                                                  approved rules and regulations that specifically         ‘‘Imputed SSA Value.’’ To better reflect                  1998.39 This law resulted in new
                                                  address credit union activities that pose risk to the    that the prudential regulator and insurer                 obligations on credit unions and NCUA,
                                                  Share Insurance Fund. NCUA has mapped all
                                                                                                           both have responsibilities for safety and                 such as prompt corrective action,
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                                                  examination related rules and regulations to one of                                                                designed to protect the Share Insurance
                                                  two categories: insurance regulatory related, or non-
                                                  insurance or consumer regulatory related. This              37 ‘‘Safe and sound,’’ ‘‘safety and soundness,’’ and   Fund.
                                                  regulatory mapping provides the basis for                ‘‘unsafe or unsound’’ are the terminology
                                                  determining how examination time is reported for         encompassing safety and soundness found in the              39 Information about the Credit Union

                                                  use in the current OTR methodology. The mapping          Act.                                                      Membership Access Act is contained within NCUA
                                                  is discussed in detail in the 2013 independent              38 See 12 U.S.C. 1781(c)(2), 1782(a)(6)(B), 1786(b),   Letter to Credit Unions 98–CU–16 located at the
                                                  study by PwC and in NCUA’s January 2016 request          1786(e), 1786(f), 1786(g), 1786(k)(2), 1786(r),           following web address: https://www.ncua.gov/
                                                  for comment.                                             1786(s), and 1790d(h).                                    Resources/Documents/LCU1998-16.pdf.



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                                                                                  Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices                                                      29941

                                                     2. During the aftermath of the                       the OTR methodology is described in                    above, the current OTR methodology
                                                  financial crisis, the Board strengthened                detail in section IV of this document.                 takes into account via the Imputed SSA
                                                  critical safety and soundness rules, such                                                                      Value the insurance-related work
                                                                                                          e. State Regulator Costs
                                                  as interest rate risk and liquidity                                                                            conducted by state regulators and relied
                                                  management standards.                                      Some commenters asserted that                       on by NCUA. In addition, the Imputed
                                                     3. NCUA also has been providing                      because NCUA equates safety and                        SSA Value is calculated using the same
                                                  regulatory relief. New authorities and                  soundness with insurance-related                       examination time allocation for federal
                                                  less prescriptive, more principles-based                activities, the OTR methodology is not                 credit unions. Thus, when more of the
                                                  rules have helped to reduce compliance                  fair and equitable as state regulators also            agency’s examination time is dedicated
                                                  burdens and provide credit unions with                  examine federally insured state-                       to insurance-related areas, the Imputed
                                                  more authority to serve members and                     chartered credit unions for safety and                 SSA Value also increases. The Imputed
                                                  manage risk. They result in examiners                   soundness. As a result, some                           SSA Value has the effect of reducing the
                                                  devoting more time to ensuring safety                   commenters contended federally                         OTR (and conversely increasing the
                                                  and soundness through the examination                   insured state-chartered credit unions are              operating fee paid by federal credit
                                                  process rather than relying on regulatory               charged twice for safety and soundness                 unions) to the benefit of state-chartered
                                                  limits.                                                 examinations; once by their state                      credit unions. This provision helps
                                                     Under this proactive approach, the                   regulator via an operating fee and then                ensure the current OTR methodology is
                                                  Board’s primary motivation for many of                  by NCUA via the OTR. Further, some                     fair and equitable.42
                                                  the agency’s current regulations and the                commenters claimed that federally                         Some commenters suggested that if
                                                  majority of the examination program is                  insured state-chartered credit unions are              the OTR continued to define all safety
                                                  to manage risk to the Share Insurance                   disadvantaged when the OTR rises due                   and soundness activities as insurance-
                                                  Fund.                                                   to increased NCUA examination time                     related, NCUA should use each state
                                                     The Board acknowledges there is not                  allocated to insurance, because the                    regulator’s actual costs instead of an
                                                  always a clear separation between the                   NCUA operating fee paid by federal                     imputed value. Others argued NCUA
                                                  role of a prudential regulator concerned                credit unions declines.                                should pay the state governments for
                                                  with enforcing laws and implementing                       NCUA appreciates the work state                     their actual costs instead of merely
                                                  public policy and that of an insurer. For               regulators do in contributing to the                   reducing the OTR.
                                                  example, NCUA relies, to the extent                     safety and soundness of the credit union                  NCUA notes that it is neither feasible
                                                  feasible, on the examination work                       system. The agency will continue to                    nor appropriate to use the actual state
                                                  performed by state regulators to manage                 partner and coordinate closely with                    regulator costs in determining the OTR.
                                                  risk to the Share Insurance Fund posed                  state regulators in this regard. It is                 To ensure the methodology is fair and
                                                  by federally insured state-chartered                    important to note that ultimately NCUA                 equitable across all federally insured
                                                  credit unions. This results in some cost                is accountable for carrying out the                    institutions, the Imputed SSA Value is
                                                  savings in the NCUA Operating Budget.                   purpose of Title II of the Act and                     intentionally designed to reflect the
                                                  Since 2004, the value of the insurance-                 managing risk to the Share Insurance                   replacement cost to NCUA if the agency
                                                  related work conducted by state                         Fund. The extent state regulators                      had to do the insurance-related work it
                                                  regulators and relied on by NCUA has                    examine for safety and soundness is the                relies on the state regulators to conduct.
                                                  been reflected in the OTR methodology                   choice of state governments. This                      The cost structure for state regulators
                                                  as the ‘‘Imputed SSA Value.’’ To ensure                 choice, along with the adequacy of the                 can vary widely and include non-
                                                  equitable treatment, the Imputed SSA                    examination, affects the extent to which               germane and potentially inordinate
                                                  Value is calculated on the same cost                    it is feasible for NCUA to rely on these               costs. Also, it is not feasible to obtain
                                                  basis as if NCUA had to conduct the                     examination reports to meet its Title II               reliable and comprehensive information
                                                  work itself.40 The current methodology                  responsibilities. State governments also
                                                  applies the same approach and                           choose the extent to which they rely on
                                                                                                                                                                 require state regulators to add an estimated 175 staff
                                                  definition of insurance-related                                                                                at a cost of up to $35 million. Most state regulators
                                                                                                          the work of NCUA in its role as insurer                participate in NCUA’s examiner training programs,
                                                  examination activities to examinations                  to reduce overall state costs and burden.              use the agency’s examination and Call Report
                                                  of federally insured state-chartered                       State-chartered credit unions are not               systems, and benefit from the agency’s exam
                                                  credit unions as for federal credit                                                                            techniques and supervisory guidance. State
                                                                                                          charged twice as a result of state                     regulators would have to individually or
                                                  unions. The Imputed SSA Value has the                   regulators also examining for safety and               collectively develop and administer these functions
                                                  effect of reducing the OTR, thereby                     soundness. The extent to which state                   and systems if NCUA did not provide them. For
                                                  taking into account the fact that all                   regulators examine for safety and                      context, NCUA’s 2017 budget included the
                                                  insured credit unions benefit from the                                                                         following for units associated with these functions
                                                                                                          soundness in a manner that can be                      and systems: $10.5 million for the Division of
                                                  insurance-related examination costs of                  relied on by NCUA reduces the overall                  Training and Development; $16.4 million for the
                                                  state regulators borne by state-chartered               agency costs to which the OTR is                       Office of the Chief Information Officer’s information
                                                  credit unions.                                          applied, benefiting all insured credit                 technology operations; and $12.3 million for the
                                                     The Board recognizes that another                                                                           Office of Examination and Insurance. Also, NCUA’s
                                                                                                          unions. Conversely, NCUA’s                             2017 capital budget includes $10.4 million to
                                                  plausible approach to accounting for the                involvement in developing reporting                    support the Enterprise System Modernization
                                                  related missions of charterer/prudential                and examination systems for all insured                program; much of this program involves
                                                  regulator and insurer is to employ an                   credit unions, publishing guidance,                    modernization of systems that directly or indirectly
                                                  alternating or partnership framework                                                                           support supervising credit unions. Additionally, in
                                                                                                          training and equipping most state                      2017 NCUA budgeted $1.4 million for training of
                                                  within the OTR methodology. This                        examiners, and participating in the                    state examiners and $162,480 in computer lease
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                                                  would simplify the OTR methodology                      examination of federally insured state-                expense for equipment provided to state regulators.
                                                  and avoid having to delineate safety and                chartered credit unions reduces overall
                                                                                                                                                                    42 Overhead Transfer Rate Review,

                                                  soundness as the primary domain of the                  state regulator costs.41 As discussed
                                                                                                                                                                 PriceWaterhouseCoopers, Section 1.4.3 (January 20,
                                                  insurer. The concept of an alternating or                                                                      2011) (Based on PwC’s review, there was no
                                                                                                                                                                 reasonable basis to conclude that the OTR
                                                  partnership framework being applied to                    41 NCUA budgeted to spend over 150,000 hours         methodology ex-ante and for reasons beyond the
                                                                                                          participating in the examination and supervision of    control of credit unions, favours or disadvantages
                                                   40 The Imputed SSA Value for 2017 is $50.8             federally insured state-chartered credit unions in     any one type of credit unions (i.e. federal versus
                                                  million.                                                2017. To conduct this additional work would            state chartered) over another.)



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                                                  29942                           Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

                                                  about the relevant cost of each state                   included determining how costs are                     comprehensive information upon which
                                                  regulator. NCUA has no authority to                     allocated to the credit union specific                 to draw any reliable conclusions.44
                                                  compel states to provide this                           activities for state regulators housed                   Based on Call Report data, NCUA did
                                                  information, nor to maintain records in                 within state offices with broader                      compare the total Operating Fees as a
                                                  such a way as to ensure proper                          responsibilities.43 NCUA staff first                   percent of average assets paid by federal
                                                  allocation of germane costs.                            reviewed publicly available information                credit unions to those reported by
                                                     As part of the process of evaluating                 with limited success. NCUA also sent                   federally insured state-chartered credit
                                                  the suggestion to use actual state                      letters to the state regulators to request             unions. Though this comparison has
                                                  regulator costs, NCUA attempted to                      details on fee structures, costs, and                  some limitations, the trends in Graph 1
                                                  obtain and review the costs of state                    allocation factors for credit union                    below show that Operating Fees
                                                  regulators and their methodologies for                  specific activities. The information                   recorded by federal credit unions and
                                                  annual and/or examination fees for                      request did not result in sufficiently                 federally insured state-chartered credit
                                                  state-chartered credit unions. This                                                                            unions are comparable in aggregate.




                                                    Further, federal credit unions                        NCUA Rules and Regulations document                    insurance purposes.48 Accordingly, the
                                                  continue to bear the majority of NCUA’s                 posted on NCUA’s public Web site at                    Board has approved rules and
                                                  operating costs. For NCUA’s 2017                        https://www.ncua.gov/About/                            regulations that specifically address
                                                  Operating Budget, federal credit unions                 Documents/mapping-ncua-regulations-                    safety and soundness with the intent to
                                                  cover 67 percent of the total Operating                 2017.pdf.                                              protect the Share Insurance Fund. As
                                                  Budget through the operating fee and                      Since NCUA equates safety and                        such, the current OTR methodology
                                                  their proportional share of the OTR.                    soundness with the term insurance-                     accounts for examination and
                                                                                                          related in the current OTR methodology,                supervision activities for insurance-
                                                  f. Regulation Mapping 45                                commenters argued that the mapping of
                                                     NCUA has mapped all examination-                                                                            related regulations as an insurance cost.
                                                                                                          NCUA’s rules and regulations is faulty.
                                                  related rules and regulations to one of                 Some commenters asserted that                            As noted above, the Board recognizes
                                                  two categories: Insurance regulatory                    classifying NCUA rules as insurance-                   that another plausible approach to
                                                  related, or non-insurance and consumer                  related is flawed because NCUA as                      accounting for the related missions of
                                                  regulatory related. A third party has                   charterer/prudential regulator is charged              charterer/prudential regulator and
                                                  reviewed the regulatory mapping.46                      with ensuring compliance with all the                  insurer is to employ an alternating or
                                                  NCUA reviews the regulatory mapping                     provisions contained within the rules                  partnership framework within the OTR
                                                  prior to the beginning of each                          and regulations.                                       methodology. This would simplify the
                                                  examination time survey cycle for any                     As noted in the Legal Analysis section               OTR methodology in part by avoiding
                                                  necessary updates.47 A detailed review                  above, the Board has the authority to                  having to map regulations to a specific
                                                  was completed again for 2017 that                       promulgate rules and regulations to                    role as it relates to federal credit unions.
                                                  resulted in minor adjustments to                        carry out the provisions of Title II                   The concept of an alternating or
                                                  classifications. For the full regulatory                (Share Insurance) of the Act, as well as               partnership framework being applied to
                                                  mapping, see the 2017 Mapping of                        examine credit unions for share
                                                     43 Based on the responses received from the state    much of the requested information as they could,         46 PwC National Credit Union Administration

                                                  regulators, many state credit union programs are        given limitations they faced.                          (NCUA) Analysis of Examination Time Survey
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                                                  divisions contained within a larger office with           45 As part of the current OTR methodology, the       (ETS) Modifications—October 2, 2013: https://
                                                  funds co-mingled with other programs. The state         agency maps NCUA examination activities related        www.ncua.gov/About/Documents/Budget/2013/
                                                  regulators that responded and that do not separate      to specific regulations based on the primary           2013ETSAnalysis.pdf.
                                                  funds for credit unions from other financial            purpose of the regulation—whether it is for carrying     47 The examiner time survey is performed

                                                  institutions supervised generally either do not         out the purpose of Title II (insurance-related) or     annually and is used to determine the percentage
                                                  allocate expenses or did not provide their allocation   part of NCUA’s responsibility as charterer or          of the workload budget relates to regulatory and
                                                  methodology.                                            prudential regulator. For details regarding the        insurance-related tasks for federal examinations and
                                                     44 In total, 27 state regulators responded to        regulation mapping, see Appendix A of the January      supervision contacts.
                                                                                                                                                                                                                        EN30JN17.291</GPH>




                                                  varying degrees. These state regulators provided as     27, 2016 request for comment.                            48 12 U.S.C. 1789(a).




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                                                                                  Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices                                                    29943

                                                  the OTR methodology is described in                     their time is reported. The proposed                   how the implicit costs of the OTR are
                                                  detail in section IV of this document.                  changes to the OTR methodology                         borne by federal and state-chartered
                                                                                                          discussed in section IV would eliminate                credit unions. Nevertheless, there are
                                                  g. Other Methodological Aspects of the
                                                                                                          the need for an examiner time survey,                  reasonable alternative approaches to
                                                  OTR
                                                                                                          resulting in additional cost savings.52                calculating the OTR that do not involve
                                                     NCUA received 23 comments                               • Allocation factors for various NCUA               use of insured shares. As discussed in
                                                  suggesting various other changes to the                 central offices: Some commenters stated                section IV, the proposed changes to the
                                                  current OTR process. The areas of the                   the allocation of costs for NCUA’s non-                OTR method eliminate the need for use
                                                  calculation receiving comments were                     field offices are not based on standard                of insured shares in the calculation.
                                                  the examiner time survey, the allocation                or consistent criteria. Overall, NCUA
                                                  factors for various NCUA central offices,               agrees that improvements can be made                   IV. Details of Proposed OTR
                                                  and the use of insured shares in the                    in allocation methods involving the                    Methodology
                                                  calculation.                                            non-field cost centers, and is addressing                 The proposed simplification of the
                                                     • Examiner time survey: 49                           this in the proposed changes to the OTR                OTR formula is intended to facilitate
                                                  Commenters generally agreed with                        methodology. Some noted that the                       greater understanding of the
                                                  using a time survey in allocating the                   Office of National Examinations and                    methodology, and will decrease the
                                                  cost of federal credit union examination                Supervision (ONES) costs cannot be 100                 agency resources necessary to
                                                  and supervision. However, some                          percent safety and soundness as it                     administer the OTR. The new approach
                                                  commenters suggested NCUA conduct a                     examines natural person credit unions                  is within NCUA’s authority and, though
                                                  time survey during all examinations and                 with assets over $10 billion and,                      simplified, would provide a sufficient
                                                  supervision contacts instead of on a                    therefore, has regulatory responsibility.              level of precision with respect to the
                                                  statistically valid sample basis. Some                  Other commenters noted ONES is also                    allocation of agency costs. The
                                                  commenters suggested having state                       responsible for reviewing Bank Secrecy                 simplified formula applies the following
                                                  regulators complete the examiner time                   Act compliance for the corporate credit                underlying principles to the allocation
                                                  survey as well.                                         unions it supervises, suggesting some                  of agency operating costs:
                                                     It is not necessary to have 100 percent              non-insurance time is spent supervising                   1. Time spent examining and
                                                  coverage of all examination and                         them. NCUA agrees that ONES time is                    supervising federal credit unions is
                                                  supervision contacts to form a                          not 100 percent insurance related and                  allocated as 50 percent insurance
                                                  statistically valid basis for the survey. A             this issue was addressed in the 2017                   related. The 50 percent allocation
                                                  complete census of all federal credit                   OTR calculation. Other commenters                      mathematically emulates an
                                                  union examinations and supervision                      questioned why the Office of Small                     examination and supervision program
                                                  contacts would result in additional                     Credit Union Initiatives and the Office                design where NCUA would alternate
                                                  agency costs—all staff would have to be                 of Consumer Financial Protection and                   examinations, and/or conduct joint
                                                  trained annually and all examinations                   Access vary in their methodology for                   examinations, between its insurance
                                                  and supervision contact hours would                     classifying time spent on field of                     function and its prudential regulator
                                                  need to be increased for the time                       membership expansion. NCUA agrees                      function if they were separate units
                                                  necessary to complete the survey.50                     that there are differences in the time                 within NCUA. It reflects an equal
                                                  Moreover, the survey is not pertinent to                allocations and has developed a                        sharing of supervisory responsibilities
                                                  NCUA’s work in federally insured state-                 consistent standard for use in the                     between NCUA’s dual roles as charterer/
                                                  chartered credit unions given NCUA is                   proposed changes to the OTR                            prudential regulator and insurer given
                                                  only functioning in its capacity as                     methodology discussed in section IV.                   both roles have a vested interest in the
                                                  insurer.51 The benefits of any small                       • Use of Insured Shares: Two                        safety and soundness of federal credit
                                                  increases in precision would be                         commenters recommended not using                       unions.54 It is consistent with the
                                                  outweighed by the corresponding costs.                  insured shares in the calculation of the               alternating examinations FDIC and state
                                                  With respect to state regulator                         OTR. The commenters suggested that                     regulators conduct for insured state-
                                                  examinations, the agency has no                         time and resources spent in each charter               chartered banks as mandated by
                                                  authority to require state regulators to                type would be more appropriate. In                     Congress. Further, it reflects that NCUA
                                                  complete a time survey, and it would be                 developing the revised OTR                             is responsible for managing risk to the
                                                  challenging to ensure uniformity in how                 methodology in 2003, one of the main                   Share Insurance Fund and therefore
                                                                                                          goals of NCUA was to allocate costs as                 should not rely solely on examinations
                                                     49 The current examiner time survey is discussed
                                                                                                          precisely as possible. For the current                 and supervision conducted by the
                                                  in detail in the Request for Comment Regarding
                                                  Overhead Transfer Rate Methodology published in
                                                                                                          OTR methodology, it is necessary and                   prudential regulator.
                                                  the Federal Register on January 27, 2016.               appropriate to incorporate insured                        2. All time and costs NCUA spends
                                                     50 Completing examination time surveys increases     shares to ensure it is precise and                     supervising or evaluating the risks
                                                  the time spent on each examination and                  equitable. Use of insured shares is                    posed by federally insured state-
                                                  supervision contact by an average of one hour. This     consistent with the mutual nature of the
                                                  equates to about 6,000 hours if survey data was
                                                                                                                                                                 chartered credit unions or other entities
                                                  collected at every onsite examination and               Share Insurance Fund and part of the                   NCUA does not charter or regulate (for
                                                  supervision contact. Additionally, annual training      statutory scheme related to Share                      example, third-party vendors and
                                                  would be required for all examiners and                 Insurance Fund deposits, premiums and                  CUSOs) is allocated as 100 percent
                                                  supervisory examiners. This would increase              dividends.53 It also reflects the
                                                  training hours for field staff by about 700 hours.
                                                                                                                                                                 insurance related. NCUA does not
                                                  The total additional time would be about 6,700          fundamental economics with respect to                  charter state-chartered credit unions nor
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                                                  hours, approximately 6 additional employees.
                                                     51 As required by law, NCUA does review                52 Based on the most recent Examination Time           54 The insurer may evaluate compliance matters

                                                  compliance with the Bank Secrecy Act and the            Survey results, field staff time would be reduced by   as part of a reciprocal arrangement with the
                                                  Flood Disaster Protection Act when it conducts an       approximately 200 hours annually. Central office       prudential regulator in evaluating matters specific
                                                  examination of a federally insured state-chartered      and regional office staff time devoted to operating,   to insurance as part of the overall shared
                                                  credit union and the state regulator has chosen not     maintaining, and administering the Examination         supervision of a credit union. A simplified
                                                  to conduct the review. These situations are limited     Time Survey and related processes would be             assumption of equal sharing reflects the offsetting
                                                  and the time associated with this activity would        reduced by approximately 150 hours annually.           benefits for each role under a framework emulating
                                                  have an indiscernible effect on the OTR.                  53 12 U.S.C. 1782(c)(2) and (3).                     an alternating examination program.



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                                                  29944                                     Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

                                                  serve as their prudential regulator.                                    assigned to its role as charterer/                                Step 1—Workload Program
                                                  NCUA’s role with respect to federally                                   prudential regulator.                                               Annually, NCUA develops a workload
                                                  insured state-chartered credit unions is                                  4. Time and costs related to NCUA’s                             budget based on NCUA’s examination
                                                  as insurer. Therefore, all examination                                  role in administering federal share                               and supervision program to carry out
                                                  and supervision work and other agency                                   insurance and the Share Insurance Fund                            the agency’s core mission. The workload
                                                  costs attributable to insured state-                                    are allocated as 100 percent insurance                            budget reflects the amount of time
                                                  chartered credit unions is allocated as                                                                                                   necessary to examine and supervise
                                                                                                                          related. NCUA conducts liquidations of
                                                  100 percent insurance related.                                                                                                            federally insured credit unions, along
                                                                                                                          credit unions, insured share payouts,
                                                     3. Time and costs related to NCUA’s                                  and other resolution activities in its role                       with other related activities, and
                                                  role as charterer and enforcer of                                       as insurer. Also, activities related to                           therefore the level of field staff needed
                                                  consumer protection and other non-                                      share insurance, such as answering                                to implement the exam program.
                                                  insurance based laws governing the                                      consumer inquiries about insurance                                Applying principles 1, 2, and 3 (those
                                                  operation of credit unions (like field of                               coverage, are a function of NCUA’s role                           relevant to the workload budget) to the
                                                  membership requirements) are allocated                                  as insurer.                                                       applicable elements of the workload
                                                  as 0 percent insurance related.55 As the                                                                                                  budget results in a composite rate that
                                                  federal agency with the responsibility to                                 These four principles are applied to                            reflects the portion of the agency’s
                                                  charter federal credit unions and                                       the activities and costs of the agency to                         overall mission program activities that
                                                  enforce non-insurance related laws                                      arrive at the portion of the agency’s                             are insurance related. For illustrative
                                                  governing how credit unions operate in                                  Operating Budget to be charged to the                             purposes, Table 1 shows the application
                                                  the marketplace, NCUA resources                                         Share Insurance Fund as discussed in                              of the allocation principles to the 2017
                                                  allocated to these functions are properly                               detail below.                                                     workload budget.56

                                                                                                                  TABLE 1—ALLOCATION OF WORKLOAD HOURS 57
                                                                                                                                                                      Insurance-
                                                                                                                          Budgeted                Percent               related
                                                           Workload programs 2017 data                                    workload               insurance                                               Allocation basis
                                                                                                                                                                       workload
                                                                                                                           hours                   related               hours

                                                                                                                               (A)                    (B)             (A) × (B)

                                                  Federal Credit Union Examination & Super-                                    498,159                        50         249,080      Based on allocation principle 1 reflecting NCUA’s
                                                    vision.                                                                                                                             roles as both prudential regulator and insurer.
                                                  State Credit Union Examination & Super-                                      167,414                      100          167,414      Based on allocation principle 2 reflecting NCUA’s
                                                    vision.                                                                                                                             role as insurer.
                                                  Consumer Compliance Reviews & Related                                          20,000                         0                 0   Based on allocation principle 3 reflecting NCUA’s
                                                    Training.                                                                                                                           role as prudential regulator.
                                                  Field of Membership & Chartering .................                                  500                       0                 0   Based on allocation principle 3 reflecting NCUA’s
                                                                                                                                                                                        role as prudential regulator.
                                                  CUSO & Third-party Vendor Reviews ...........                                   5,576                      100             5,576    Based on allocation principle 2 reflecting NCUA’s
                                                                                                                                                                                        role as insurer. Field staff time conducting reviews
                                                                                                                                                                                        of CUSOs and third-party vendors—NCUA does
                                                                                                                                                                                        not charter or regulate CUSOs and third-party
                                                                                                                                                                                        vendors.

                                                       Total ........................................................          691,649                       N/A         422,070

                                                             Total Insurance-Related Workload                           ....................   ....................           61%     Weighted average of field staff program time de-
                                                               Hours to Total Workload Hours.                                                                                          voted to NCUA’s role as insurer.



                                                  Step 2—Operating Budget                                                    The agency achieves its primary                                weighted average allocation factor (60
                                                                                                                          mission through the examination and                               percent) representing the aggregate
                                                     The Operating Budget represents the                                  supervision program. For the proposed                             budgets for the Regions, Ones, and the
                                                  costs of the activities associated with                                 formula, as applied to the 2017                                   specific agency offices listed in Step 2
                                                  achieving the strategic goals and                                       Operating Budget, the percentage of                               is applied to the central offices that
                                                  objectives set forth in the NCUA
                                                                                                                          insurance-related workload hours (61                              design or oversee the examination and
                                                  Strategic Plan. The Operating Budget is
                                                                                                                          percent) derived from Step 1 represents                           supervision program, or support the
                                                  based on agency priorities and
                                                                                                                          the main allocation factor used in Step                           agency’s overall operations. These costs
                                                  initiatives that drive resulting resource
                                                  needs and allocations. Information                                      2 for the costs of the field offices (the                         in total make up NCUA’s Operating
                                                  related to NCUA’s budget process,                                       Regions and ONES). A few agency                                   Budget. Table 2 reflects the application
                                                  including detailed information on the                                   offices have roles that are significantly
                                                  Board-approved 2017 Operating Budget,                                   distinct enough to warrant their own
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                                                  is available on the agency’s Web site.58                                allocation factors, as discussed below. A

                                                    55 This includes any reviews of credit unions                         Action, that are part of share insurance under Title              actual results may vary from those presented herein
                                                  focused solely on compliance, such as a fair lending                    II as covered by principle 4.                                     for illustrative purposes.
                                                  exam. It does not include the more broadly based                           56 If the proposed change to the methodology is                   57 Numbers may not reconcile exactly due to

                                                  examinations and supervision contacts of federal                        adopted by the Board, the calculation would apply                 rounding.
                                                  credit unions covered by principle 1. It also does                      to future workload and operating budgets. Thus,                      58 https://www.ncua.gov/About/Pages/budget-

                                                  not include enforcing laws, like Prompt Corrective                                                                                        strategic-planning/supplementary-materials.aspx.



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                                                                                              Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices                                                                                       29945

                                                  of the OTR allocation factors to the 2017
                                                  Operating Budget as an example.

                                                                                                              TABLE 2—ALLOCATION OF NCUA OPERATING BUDGET 59
                                                                                                                                                                                                                                                    Operating cost
                                                                                                                                                                                                                                                    to be borne by
                                                                                                                                                                                                       Operating              Percent                  the share
                                                                                                         Cost area (2017 data)                                                                          budget               insurance                 insurance
                                                                                                                                                                                                       $ millions              related                    fund
                                                                                                                                                                                                                                                       $ millions

                                                                                                                                                                                                          (A)                     (B)                 (A) × (B)

                                                  Regions and ONES: The financial budget for the agency’s five regional offices and ONES is
                                                    allocated based on the weighted average of insurance-related activities calculated from the
                                                    workload budget in Step 1 (using principles 1, 2, and 3). Resources in the regions and
                                                    ONES execute NCUA’s examination program. Thus, the budgeted costs related to these
                                                    programs should receive the same allocation basis as the programs themselves ................                                                               170.9                        61             104.3
                                                  Asset Management Assistance Center: Manages liquidation payouts and assets acquired
                                                    from liquidations on behalf of the Share Insurance Fund. Thus, the OTR allocation factor is
                                                    based on principle 4 and allocated at 100 percent insurance related ....................................                                                      7.4                     100                     7.4
                                                  Office of Consumer Financial Protection and Access Largely in NCUA’s role as charterer
                                                    and prudential regulator, this office is responsible for chartering and field-of-membership
                                                    matters, low-income designations, bylaw amendments, consumer financial literacy efforts,
                                                    consumer inquiries and complaints, consumer protection compliance, fair lending examina-
                                                    tions, and related interagency coordination. These activities are allocated based on prin-
                                                    ciple 3 as 0 percent insurance related. The office does some work with respect to federally
                                                    insured state-chartered credit unions, including share insurance coverage matters, in
                                                    NCUA’s role as insurer; these activities are allocated based on principle 4 as 100 percent
                                                    insurance related. The net of this combined activity results in an allocation factor of 13 per-
                                                    cent insurance related. See discussion below for more details ..............................................                                                  9.9                       13                    1.3
                                                  Office of Small Credit Union Initiatives: Provides consulting and training services for small
                                                    credit unions, both federal credit unions and federally insured state-chartered credit unions.
                                                    Also processes grants and loans for federally insured credit unions. Principle 1 is applied
                                                    to the office’s work with federal credit unions and principle 2 is applied to the office’s work
                                                    with federally insured state-chartered credit unions. The net of this combined activity re-
                                                    sults in an allocation factor of 60 percent insurance related. See discussion below for more
                                                    details .......................................................................................................................................               6.5                       60                    3.9
                                                  Subtotal: The 60 percent subtotal factor represents the dollar-weighted average of the
                                                    above four cost centers (Regions and Ones, Asset Management Assistance Center, Office
                                                    of Consumer Financial Protection and Access, and Office of Small Credit Union Initiatives)
                                                    representing specific aspects of NCUA’s mission ...................................................................                                         194.6                       60              116.8
                                                  All Other Offices: This category includes the offices that design or oversee the agency’s
                                                    mission and its related offices, or provide necessary support to mission offices or the entire
                                                    agency. As such, the proportion of insurance-related activities for these offices correspond
                                                    to that of the mission offices. Therefore, these office costs are allocated based on the
                                                    weighted average of insurance-related activities calculated in the subtotal above ................                                                          103.6                       60                62.2

                                                        Total ......................................................................................................................................            298.2    ........................           179.0



                                                  Regional Offices and ONES                                                   Asset Management Assistance Center                                       principle 4 at 100 percent insurance
                                                                                                                                                                                                       related.
                                                     The financial budget for the agency’s                                       NCUA conducts credit union
                                                  five regional offices and ONES is                                           liquidations and performs management                                     Office of Consumer Financial Protection
                                                  allocated based on the weighted average                                     and recovery of assets through the Asset                                 and Access
                                                  of non-insurance and insurance-related                                      Management and Assistance Center. The                                       This division is responsible for
                                                  activities calculated in Step 1. The                                        Asset Management Assistance Center                                       NCUA’s consumer financial literacy
                                                  Regions and ONES execute NCUA’s                                             assists NCUA regional offices with the                                   efforts, consumer inquiries and
                                                  examination programs; thus, the                                             review of large, complex loan portfolios                                 complaints, consumer protection
                                                  budgeted costs related to these offices                                     and actual or potential bond claims. It                                  compliance and rulemaking, fair
                                                  should receive the same allocation basis                                    also participates extensively in the                                     lending examinations, interagency
                                                  as the programs themselves. The                                             operational phases of conservatorships                                   coordination and outreach, chartering
                                                  allocation factor is based on principles                                    and records reconstruction. The purpose                                  and field-of-membership matters, low-
                                                  1, 2, and 3 as documented in Table 1.                                       of the Asset Management Assistance                                       income designations, charter
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                                                  The budget for the regional offices and                                     Center is to manage and reduce costs to                                  conversions, and bylaw amendments.
                                                                                                                                                                                                       The majority of the work performed by
                                                  ONES is allocated at 61.0 percent for                                       the Share Insurance Fund and credit
                                                                                                                                                                                                       the Office of Consumer Financial
                                                  insurance-related activities.                                               union members of credit union failures.
                                                                                                                                                                                                       Protection and Access is related to
                                                                                                                              Thus, OTR allocation is based on                                         NCUA’s role as prudential regulator and

                                                    59 The totals may not reconcile exactly due to

                                                  rounding.


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                                                  29946                                       Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

                                                  charterer of federal credit unions. This                                   insurance related. However, some work                                         The composite rate of this office’s
                                                  office is unique and differs from the                                      the office performs involves federally                                      insurance-related activities calculates as
                                                  Regions and ONES in the distribution                                       insured state-chartered credit unions,                                      13 percent as reflected in Table 3. Thus,
                                                  and nature of work performed related to                                    which falls under principle 4. The office                                   an allocation factor of 13 percent is
                                                  federal credit unions. Thus, principle 3                                   also addresses share insurance coverage                                     applied to the office’s financial budget
                                                  is applied to the majority of this office’s                                matters, which also falls under principle                                   in the OTR calculation.
                                                  work and allocated at 0 percent                                            4.

                                                                 TABLE 3—ALLOCATION OF THE OFFICE OF CONSUMER PROTECTION AND FINANCIAL ACCESS STAFF TIME
                                                                                                                                                                                                                                                              Proportion
                                                                                                                                                                                                         Staff time
                                                                                                                                                                             Number of                                                                          of staff
                                                                                                                                                                                                         spent on                   Allocation
                                                                                                                                                                                 staff                                                                        insurance-
                                                                                                     Division                                                                                            activities                   factor
                                                                                                                                                                              (full time                                                                     related work
                                                                                                                                                                                                         (full time                 (percent)
                                                                                                                                                                             equivalent)                                                                       (full time
                                                                                                                                                                                                        equivalent)                                           equivalent)

                                                  Administrative ..................................................................................................                             3    ........................   ........................   ........................
                                                     —Principle 3 Activities ..............................................................................               ........................                      2.7                           0                       0.0
                                                     —Principle 4 Activities ..............................................................................               ........................                      0.3                       100                         0.3
                                                  Consumer Access ............................................................................................                                20     ........................   ........................   ........................
                                                     –Principle 3 Activities ................................................................................             ........................                    15.0                            0                       0.0
                                                     —Principle 4 Activities ..............................................................................               ........................                      5.0                       100                         5.0
                                                  Consumer Affairs .............................................................................................                              12     ........................   ........................   ........................
                                                     —Principle 3 Activities ..............................................................................               ........................                    11.4                            0                       0.0
                                                     —Principle 4 Activities ..............................................................................               ........................                      0.6                       100                         0.6
                                                  Consumer Compliance Policy and Outreach ..................................................                                                  10     ........................   ........................   ........................
                                                     —Principle 3 Activities ..............................................................................               ........................                    10.0                            0                       0.0
                                                     —Principle 4 Activities ..............................................................................               ........................                      0.0                       100      ........................

                                                               Totals .................................................................................................                       45     ........................   ........................                      5.9

                                                                     Insurance-Related Full Time Equivalent Staff to Total Staff .....                                                    13%        ........................   ........................   ........................



                                                     The office’s administrative staff                                       share insurance questions received from                                     insured state-charted credit unions. The
                                                  provides support for the whole office.                                     consumers which falls under principle                                       proportion of time spent on federal
                                                  Ten percent of this unit’s work was                                        4. The division spent the remaining 95                                      credit unions is allocated based on
                                                  devoted to supporting insurance-related                                    percent of its time on consumer related                                     principle 1 while federally insured
                                                  functions, like responding to consumer                                     activities like administering the                                           state-chartered credit union work is
                                                  inquiries on share insurance coverage.                                     Financial Literacy Program, which falls                                     allocated based on principle 2. Other
                                                  Thus, principle 4 is applied to those                                      under principle 3.                                                          office personnel process grants and
                                                  activities as 100 percent insurance                                           The Division of Consumer                                                 loans for both federal credit unions and
                                                  related while the remaining 90 percent                                     Compliance Policy and Outreach                                              federally insured state-chartered credit
                                                  of their time was spent supporting                                         focuses on issues related to consumer                                       unions. Grant and loan activities are
                                                  charting, bylaw, field of membership,                                      regulations including implementing the                                      allocated the same way as the
                                                  and related activities, which fall under                                   Equal Credit Opportunity Act, the Home                                      consulting and training time using
                                                  principle 3 as 0 percent insurance                                         Mortgage Disclosure Act, the Truth in                                       principles 1 and 2. The resulting
                                                  related.                                                                   Lending Act, and the Real Estate                                            allocation factor for the Office of Small
                                                                                                                             Settlement Procedures Act. All of these                                     Credit Union Initiatives is 60 percent as
                                                     The Division of Consumer Access
                                                                                                                             activities fall under principle 3;                                          shown in Tables 4 and 5.60
                                                  staff spent 25 percent of their time
                                                                                                                             therefore, 100 percent of the division’s
                                                  addressing insurance-related functions,                                                                                                                  Table 4 illustrates the allocation for
                                                                                                                             staff time is allocated as 0 percent
                                                  like insurability standards for mergers                                                                                                                the Office of Small Credit Union
                                                                                                                             insurance related.
                                                  and insurance applicants where                                                                                                                         Initiative’s consulting hours between
                                                  principle 4 applies. The remainder of                                      Office of Small Credit Union Initiatives                                    federal and state-chartered credit unions
                                                  this unit’s time was spent processing                                        The proposed methodology allocates                                        applied to the budgeted hours for 2017.
                                                  various chartering and field of                                            the cost of the Office of Small Credit                                      Principle 1 is applied for federal
                                                  membership expansion applications and                                      Union Initiatives based on principles 1                                     charters and principle 2 is applied for
                                                  bylaw matters where principle 3                                            and 2. The office tracks the time the                                       state charters. The result is a composite
                                                  applies.                                                                   Economic Development Specialists                                            rate of 59.3 percent insurance-related
                                                     The Division of Consumer Affairs staff                                  spent consulting and training both                                          hours for the Economic Development
                                                  spent 5 percent of its time addressing                                     federal credit unions and federally                                         Specialists.
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                                                    60 About 73% of all grants and loans processed by                        were for federal credit unions. Of the 18,633 hours                         consulting and training, about 81% is for federal
                                                  the Office of Small Credit Union Initiatives in 2016                       budgeted for Economic Development Specialist                                credit unions.



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                                                                                              Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices                                                                                  29947

                                                                                        TABLE 4—2017 ECONOMIC DEVELOPMENT SPECIALIST WORKLOAD ALLOCATION
                                                                                                                                                                                                                                                Percent of
                                                                                                                                                                                                 Percent                   Hours
                                                                                                                                                                                Budget                                                            budget
                                                                                                  Charter type                                                                                  insurance               insurance
                                                                                                                                                                                (hours)                                                         insurance
                                                                                                                                                                                                  related                 related                 related

                                                  Federal Charter ................................................................................................                  15,185                  50                   7,592                   40.7
                                                  State Charter ...................................................................................................                  3,448                 100                   3,448                   18.5

                                                        Total ..........................................................................................................            18,633                 N/A                  11,040                   59.3



                                                    Table 5 illustrates the allocation of the                                 Initiatives by charter type. Principle 1 is                       This results in a composite rate of 63.7
                                                  grant and loan activities performed by                                      applied for federal charters and                                  percent insurance-related activities for
                                                  the Office of Small Credit Union                                            principle 2 is applied for state charters.                        grants and loans.

                                                                                     TABLE 5—GRANT APPROVAL AND LOAN DISBURSEMENT 2016 BY CHARTER TYPE 61
                                                                                                                                                                                                  Percent                 Total
                                                                                                                                                                           Total grants                                                         Percent of
                                                                                                  Charter type                                                                                  insurance-             insurance-
                                                                                                                                                                            and loans                                                             total
                                                                                                                                                                                                  related                related

                                                  Federal Charter ................................................................................................                        235               50                      118                  36.3
                                                  State Charter ...................................................................................................                        89              100                       89                  27.5

                                                        Total ..........................................................................................................                  324              N/A                      207                  63.7



                                                    Table 6 shows the resulting overall                                       Office of Small Credit Union Initiatives.                         budget for this office in the OTR
                                                  composite rate of 59.8 percent                                              This factor is applied to the financial                           calculation.
                                                  insurance-related activities for the

                                                                                                                   TABLE 6—ALLOCATION OF THE FINANCIAL BUDGET
                                                                                                                                                                                                  Insurance-                               Budget
                                                                                               Staff                                                                  Budget                        related                               allocation
                                                                                                                                                                                                   (percent)

                                                  Economic Development Specialists ............................................                                             3,733,000                                59.3                           2,211,982
                                                  Grants and Loans ........................................................................                                   527,000                                63.7                             335,881

                                                        Total ......................................................................................                        4,260,000                                59.8                           2,547,773



                                                  All Other Offices                                                           are allocated at 60.0 percent insurance-                          Insurance Fund.62 Using the result from
                                                                                                                              related activities for purposes of                                Step 2, the OTR calculation is shown in
                                                    NCUA’s remaining offices design or                                        calculating the OTR:                                              Table 7.
                                                  oversee the agency’s mission and its                                          • NCUA Board,
                                                  related offices, or provide necessary                                         • Executive Director,                                                  TABLE 7—OTR CALCULATION
                                                  support to mission offices or the entire                                      • General Counsel,
                                                  agency. As such, the proportion of                                            • Chief Financial Officer,                                      Operating Costs to be Borne by
                                                  insurance-related activities for these                                        • Chief Information Officer,                                      the Share Insurance Fund ........                    $179.0
                                                  offices corresponds to that of the                                            • Chief Economist,                                              ÷ Total Operating Budget .............                 $298.2
                                                  mission offices. It would be                                                  • Human Resources,
                                                                                                                                • Examination and Insurance,                                    = OTR ...........................................      60.0%
                                                  administratively burdensome to attempt
                                                                                                                                • Inspector General,
                                                  to account for any variation in activity                                      • Minority and Women Inclusion,
                                                  levels from the mission functions, and                                        • Public and Congressional Affairs,                               Based on data used to determine the
                                                  would not result in a material difference                                   and                                                               OTR for 2017, the proposed changes to
                                                  in outcomes. Therefore, these office                                          • Continuity and Security                                       the OTR methodology would result in
                                                  costs are allocated based on the                                            Management.                                                       an OTR of 60.0 percent. The current
                                                  weighted average of insurance-related                                                                                                         methodology resulted in an OTR of 67.7
                                                  activities calculated in the subtotal of                                    c. Step 3—Calculate the OTR                                       percent for 2017. Table 8 summarizes
                                                  agency costs for the offices above that                                        The OTR represents the percentage of                           the results for the 2017 OTR calculation
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                                                  have a distinct allocation factor. The                                      the NCUA Operating Budget that is                                 using the current and proposed
                                                  budgeted costs for the following offices                                    funded by a transfer from the Share                               methodologies.



                                                    61 Numbers may not reconcile exactly due to                                 62 The percentage of actual expenses funded by

                                                  rounding.                                                                   the Share Insurance Fund as they are incurred each
                                                                                                                              month.


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                                                  29948                                       Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Notices

                                                                                                                        TABLE 8—2017 OTR RESULTS COMPARISON
                                                                                                                                                                   Current                        Proposed methodology                       Change 63
                                                                                                                                                                 methodology

                                                  OTR Percent ................................................................................                                      67.7%                                 60.0%                         ¥7.70%
                                                  OTR $ Millions .............................................................................                                      $201.8                                $179.0                        ¥$22.8



                                                    For informational purposes only,                                          funded explicitly and implicitly by                                        insured state-chartered credit unions
                                                  Table 9 illustrates the portion of                                          federal credit unions and federally                                        respectively.
                                                  NCUA’s total Operating Budget costs

                                                                                                                  TABLE 9—OPERATING BUDGET COST DISTRIBUTION
                                                                                                                                                                                                                                      Federally insured state-
                                                                                 Portion of 2017 operating budget covered by:                                                                   Federal credit unions                 chartered credit unions

                                                  Federal Credit Union Operating Fee ..................................................................................                      40.0% ...............................   0.0%.
                                                  OTR (proportional based on insured shares) ....................................................................                            30.8% ...............................   29.2%.
                                                                                                                                                                                             (60.0% × 51.3%). .............          (60.0% × 48.7%).
                                                        Total ............................................................................................................................   70.8% 64 ...........................    29.2%.



                                                    The proposed change to the OTR                                            require public board briefings every                                         Commenters are also encouraged to
                                                  methodology would result in the annual                                      year, no later than each December, on                                      discuss any other relevant issues they
                                                  Operating Fee paid by federal credit                                        the results of the calculation and to post                                 believe NCUA should consider with
                                                  unions increasing by about 24%—an                                           all related materials to NCUA’s Web                                        respect to the OTR methodology and, to
                                                  increase of $22.8 million from $96.4                                        site.                                                                      the extent feasible, provide
                                                  million to $119.2 million. Based on the                                        • As part of future rulemaking,                                         documentation to support any
                                                  2017 Operating Fee scale, Table 10                                          indicate for any proposed regulation                                       recommendations.
                                                  provides several examples of how a                                          involving the activities and authorities                                     By the National Credit Union
                                                  federal credit union’s operating fee                                        of credit unions whether the regulation                                    Administration Board on June 23, 2017.
                                                  would increase.                                                             is based on Title I, Title II, and/or Title                                Gerard Poliquin,
                                                                                                                              III of the Act and seek comment on this                                    Secretary of the Board.
                                                    TABLE 10—EXAMPLES OF OPERATING                                            determination. While the proposed new                                      [FR Doc. 2017–13635 Filed 6–29–17; 8:45 am]
                                                     FEE INCREASE FOR FEDERAL CREDIT                                          OTR methodology would no longer rely                                       BILLING CODE 7535–01–P
                                                     UNIONS                                                                   on mapping of regulations, this will
                                                                                                                              increase clarity regarding the purpose of
                                                                                                     Increase to              and authority for any new or updated
                                                        Asset size of federal                          annual                                                                                            OFFICE OF PERSONNEL
                                                            credit union                              operating               regulations and preserve future
                                                                                                         fee                  flexibility with respect to any desired                                    MANAGEMENT
                                                                                                                              changes to the OTR methodology.
                                                  $9.46 billion ..........................                 $133,234                                                                                      Notice of Submission for Approval:
                                                  $1.01 billion ..........................                   51,143
                                                                                                                                 The Board seeks comments on all the                                     Questionnaire for Non-Sensitive
                                                  $503 million ..........................                    25,445           proposed revisions to the OTR                                              Positions (SF 85)
                                                  $100 million ..........................                     5,060           methodology and formal adoption of the
                                                  $50 million ............................                    2,526           procedures discussed above. In                                             AGENCY:  U.S. Office of Personnel
                                                  $10 million ............................                      505           particular, the Board is interested in                                     Management.
                                                  $1 million ..............................                       0           comments on alternative approaches to                                      ACTION: 60-Day notice and request for
                                                                                                                              arriving at an allocation factor for the                                   comments.
                                                  V. Request for Comment                                                      cost of examining and supervising
                                                    In addition to the proposed changes to                                    federal credit unions (principle 1). For                                   SUMMARY:   The National Background
                                                  the OTR methodology, the Board                                              example, within the context of the                                         Investigation Bureau (NBIB), U.S. Office
                                                  proposes to formally adopt the                                              overall simplification of the OTR                                          of Personnel Management (OPM) is
                                                  following OTR related processes:                                            methodology, should federal credit                                         notifying the general public and other
                                                    • To solicit through the Federal                                          union examination and supervision                                          Federal agencies that OPM is seeking
                                                  Register public comment on the OTR                                          activity be allocated primarily to the                                     Office of Management and Budget
                                                  methodology at least every 3 years, and                                     operating fee, or should it continue to                                    (OMB) approval of a revised information
                                                  whenever NCUA seeks to change the                                           reflect that much of NCUA’s                                                collection, Questionnaire for Non-
                                                  OTR methodology.                                                            examination and supervision focus is on                                    Sensitive Positions, (SF 85).
                                                    • Maintain the staff delegation to                                        managing risk to the Share Insurance                                       DATES: Comments are encouraged and
                                                  administer the OTR methodology but
mstockstill on DSK30JT082PROD with NOTICES




                                                                                                                              Fund.65                                                                    will be accepted until August 29, 2017.
                                                    63 For 2017, the proposed OTR methodology                                 Documents/Agenda%20Items/                                                  31 percent. Conversely, if the results of the
                                                  calculation would result in a decline of 11.4% from                         AG204161117Item4a.pdf.                                                     Examiner Time Survey (about 88 percent insurance-
                                                  the current methodology.                                                      65 To provide context for commenters, an
                                                                                                                                                                                                         related) were used for the allocation factor for
                                                    64 Based on the current OTR methodology, 67                               assumption under principle 1 in the proposed OTR                           principle 1 in the proposed OTR methodology, it
                                                  percent of the total 2017 Operating Budget is                               methodology that only the examination and                                  would result in an OTR of about 85 percent.
                                                  covered by federal credit unions through Operating                          supervision of troubled federal credit unions was
                                                  Fees and the OTR: https://www.ncua.gov/About/                               insurance-related would result in an OTR of about



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Document Created: 2017-06-30 06:01:47
Document Modified: 2017-06-30 06:01:47
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionRequest for comment.
DatesComments must be received on or before August 29, 2017 to ensure consideration.
ContactRussell Moore or Julie Decker, Loss/ Risk Analysis Officers, Office of Examination and Insurance, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314 or telephone: (703) 518-6383 or (703) 518-6384.
FR Citation82 FR 29935 

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