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NCUA Board Member Rodney E. Hood Statement on the Request for Comment on the Overhead Transfer Rate Methodology

December 2023
NCUA Board Member Rodney E. Hood Statement on the Request for Comment on the Overhead Transfer Rate Methodology
Rodney E. Hood

NCUA Board Member Rodney E. Hood during a meeting of the NCUA Board.

As Prepared for Delivery on December 14, 2023

Thank you, Mr. Chairman, and thank you, David and Kelly, for being with us this morning. I am delighted we are bringing this action before us today and asking for public comment on the NCUA’s Overhead Transfer Rate methodology. We, as an agency, previously committed to improving transparency and to providing for more stakeholder involvement in our budget approval and funding process. Today’s effort further demonstrates that we take this commitment very seriously.

The NCUA has used different methods for computing the OTR since it was first established in the early 1970s. The current OTR methodology was developed and adopted in 2017 after we went through a similar exercise to what we are introducing today to obtain public comments on it.

I believe our current OTR methodology, which incorporates the four key principles in allocating agency operating costs, is very transparent and comprehensive and appropriately distinguishes between the agency’s dual role as a prudential regulator and that of an insurer, which is unlike any other regulator. Additionally, the current OTR methodology appropriately defines the safety and soundness related activities and other agency functions that are directly related to insurance and accounts for the value of the insurance-related work performed by state supervisory authorities.

However, consistent with our commitment to transparency, any process, OTR methodology included, can always benefit from being re-evaluated to ensure its effectiveness. Therefore, I am happy to support bringing forwarding this request for comment to obtain stakeholder input on the NCUA’s OTR methodology.

But first, I do have a few quick questions:

There is often a misunderstanding on the way the NCUA computes the OTR, and how it translates to the operating budget as a whole. Can you please clarify which institutions pay into the OTR and which institutions pay the operating fee?

Very well, and in this case, because federally insured, state-chartered credit unions are paying into the OTR, and federal credit unions are paying into both the OTR and the operating fee, can you please go over the percentage breakdown of how federally insured, state-chartered credit unions versus federal credit unions fund the overall NCUA operating budget?

Thank you, I have no further questions. Chairman Harper, I yield back my time.

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