WASHINGTON—NAFCU is opposing the interagency proposed rule on incentive-based compensation (IBC) arrangements and in a comment letter to NCUA asks that the rule be withdrawn.
“This is the latest example of a Dodd-Frank rule being unnecessarily applied to credit unions. It is widely-acknowledged, credit unions neither caused the financial crisis, nor used any of the risk-inducing IBC arrangements contemplated by this rule,” said NAFCU President and CEO Dan Berger. “Unfortunately, as we have seen time-and-time again, credit unions are being punished for the bad actions of Wall Street and big banks. NCUA and the other federal banking agencies should exempt credit unions from this rule.”
In the association’s eight-page comment letter, Berger advocated that NCUA issue guidance covering IBC arrangements rather than additional regulations, which will only increase credit union compliance costs and further confer a competitive advantage to big banks that can afford such burdens. If the agency moves forward with a rule, Berger urged NCUA to revise the rule so that requirements are based on actual risks present, not on a credit union’s asset size.
Specifically, he wrote, “NAFCU believes the agencies have discretion to correlate differing standards for individual credit unions based on the inherent risk related to a credit union’s practices and products, rather than depend on a credit union’s asset size. Instead, NAFCU and our members advocate that this proposal should be tailored to specific issues and implemented on a case-by-case basis, depending on the risk profile of the individual credit union.”
Berger also recommended that NCUA consider the unique business model of credit unions, such as the volunteer nature of credit union boards.
“These provisions are complicated matters even for a paid or professional board,” said Berger. “As a result of these requirements, this rule will become untenable for credit union boards unless an exception or provision is provided that considers their volunteer nature.”
The proposed IBC rule prohibits features of IBC arrangements that encourage inappropriate risks, and sets out minimum standards of governance and disclosures. This rule would not require a credit union to report the actual amount of compensation, fees, or benefits of individual covered persons as part of the disclosure and recordkeeping requirements. It only covers credit unions with assets greater than $1 billion.