Thursday’s National Credit Union Administration (NCUA) board meeting features a revised proposed rule on executive compensation, a rule that was last proposed in 2011. The Credit Union National Association (CUNA) believes the re-proposed rule has been substantially changed from the original proposal, but will be looking to see if it has been sufficiently tailored to credit unions.
The rule, as put forth by the NCUA and other federal financial regulators in 2011, would have prohibited incentive-based compensation arrangements at a covered financial institution that provide excessive compensation or that could expose the institution to inappropriate risks that could lead to material financial loss.
In its comment letter, CUNA stressed that credit unions “have generally not provided the kinds of abusive compensation plans that are the subject of this proposal and that encouraged unmanageable risks, thereby contributing to the financial crisis.”
The rule as first proposed would apply to institutions of $10 billion or more in assets. However, raising that threshold to $50 billion--thereby exempting all but a handful of credit unions--would still concern CUNA, as a rule set for higher-asset institutions can often filter down and inform the treatment of those below the threshold.
In the new proposal, CUNA will be looking for it to distinguish between credit unions and those entities that rewarded undue risk-taking.
CUNA also hopes to see a rule tailored so that it can be used appropriately based on an institution’s size and structure, so that credit unions are not once again unduly burdened by a rule that is aimed at the bad actors in the marketplace.