National Association of Federal Credit Unions (NAFCU) President and CEO Dan Berger issued the following statement in response to the National Credit Union Administration (NCUA) Board's vote on the re-proposed interagency rule on executive compensation rule and the proposed occupancy rule, formerly known as the fixed-assets rule.
“NAFCU and our members support transparency but have had concerns about the incentive-based executive compensation rule since it was first proposed in 2011. We believed then, and do now, that this proposal is onerous and burdensome as applied to credit unions,” said Berger. “Meanwhile, regulators and lawmakers have widely acknowledged that credit unions, with their unique and prudent business model, did not engage in the questionable, high-risk behavior seen at publicly traded firms which contributed to the financial crisis.”
Berger added, “We will carefully analyze today’s proposed rule for its full impact on credit unions. There has already been 1,280 credit unions lost – 17 percent of the industry – due to the crushing burden of Dodd-Frank Act rules, and we urge NCUA to help relieve regulatory burden, not compound it.”
NCUA is the first of the federal financial industry regulators to reissue the proposal, which was first released jointly by the agencies in 2011 but was never approved in final form.
Today’s proposal includes grandfather provisions for incentive-based compensation arrangements that begin prior to the rule’s effective date, which would be 18 months following publication of any final rule in the Federal Register. In remaining cases:
- Credit unions with more than $1 billion in consolidated assets would be barred from establishing any incentive-based compensation plan that is excessive or could lead to a material loss; would have to create records on their IBC plans and retain them for seven years; and would have to obtain their boards’ approval of the plans and any material exceptions or adjustments.
- Credit unions with more than $50 billion in assets would also be required to defer 40 percent of CEOs’ or 50 percent of “risk takers’” incentive-based compensation for at least three years. Vesting periods are also addressed.
The rule’s requirements would not apply to credit unions below $1 billion in assets.
“Concerning today’s occupancy proposal, we appreciate the agency listening to our recommendation and proposing a rule that would provide greater flexibility for credit unions to make strategic occupancy plans based on growth opportunities,” said Berger. “The removal of outdated restrictions, not mandated by the Federal Credit Union Act, will allow credit unions to stay competitive in today’s financial marketplace. NAFCU is reviewing the proposal to see if there are additional opportunities for true regulatory relief.”
NCUA’s proposed occupancy rule would allow federal credit unions more flexibility to take advantage of mixed-use buildings typically found in urban areas. While NAFCU supported NCUA’s final rule on fixed assets, approved last July, the association raised concerns about the rule’s occupancy requirements and urged that the agency provide credit unions with flexibility.