WASHINGTON—NCUA’s succession planning rule approved in December 2024 may see its implementation delayed temporarily, or perhaps permanently, by President Trump’s recent executive order suspending the effective date of any federal agency regulations not yet effective, according to former NCUA Chairman Dennis Dollar.
“Personally, I believe the rule is an unjustified overreach by a federal regulatory agency into the fiduciary process of a board to set the direction and put in place the proper executive leadership of the credit union,” said Dollar, speaking at a breakout session during the America’s Credit Unions Governmental Affairs Conference in Washington. “And it would be a positive development if NCUA were forced to delay or rescind the rule. However, that is still somewhat up in the air depending upon whether the President lifts or revises his executive order.”
The NCUA succession planning rule was scheduled to become effective January 2026 prior to the Trump executive order.
“The rule itself is a classic example of regulatory overreach in that it could result in credit union examiners putting themselves in the middle of a credit union’s recruiting, evaluation, hiring and perhaps compensation of its CEO and executives,” the principal partner at Dollar Associates out of Birmingham, Alabama told the audience of approximately 250 conference attendees.
“It is type of one-size-fits-all regulation that should have been guidance at most and was the seeming focus of the President’s executive order,” said Dollar. “That said, it is not a sure thing that the rule may not become effective at some point in the future if it is not repealed.”
“If implemented, this recent regulation would put NCUA in a position to oversee a credit union board’s fiduciary responsibility to hire a CEO and that CEO’s ability to hire his or her executive team,” Dollar explained. “But it would also get down into the weeds of whether the credit union has a sufficiently robust process for recruiting board members and other volunteers that reflect the diversity of the membership of the credit union in the eyes of the examiner.”
“Credit unions were already reviewing their succession plans with the 2026 implementation date in mind in an attempt to guess what their examiner would require and how the credit union can comply with the regulation without sacrificing too much of its control over its own leadership future,” Dollar said. “The executive order helped them breathe a sigh of relief and there is a lot of hope that the President’s order may eventually lead to the repeal of the rule itself.
“Or the executive order could be lifted at some point in the future and, if not repealed in the meantime, this rule could become an overly prescriptive mandate of how your credit union should handle succession in the eyes of the regulator,” Dollar told the audience. “Time will tell. But, in the meantime, credit unions are doing a good bit of homework on their existing succession plans. And even though I don’t believe this should be a full-fledged regulatory mandate through a rule, having a succession plan is good business and probably does need a review every few years - not because NCUA requires it but because best business practice does.”
Flexible Plan
Dollar emphasized that having a flexible succession plan that internally establishes executive training, cross training, vacancy responsibility assignments, processes to follow in the event of a vacancy, retirement planning and a general process to follow in evaluating and recruiting candidates is a good thing even though he does not believe it should be mandated by regulation.
“Every credit union should have such a plan. And the overwhelming majority do so,” he said. “NCUA’s role should be limited to whether the leadership in place is meeting the strategic risk of unplanned succession and that is impacting potentially the safety and soundness of the credit union. That can be accomplished without a rule that gives them too much authority over flying the plane at the credit union.”
“The credit union leadership of board and executive team should pilot the plane,” he explained. “NCUA’s job is like the FAA’s. Make sure the planes are safe and sound and that the pilots are qualified. It’s not the job of the regulator to fly the planes”
Dollar said the question this new rule raises is who should be the evaluator of whether that succession plan is appropriate for each credit union.
“Should it be the credit union fiduciaries themselves? Or should it be the NCUA examiner? The answer should be quite obvious,” Dollar said. “The credit union fiduciaries make their succession decisions internally. And the examiners should evaluate the results of those decisions based upon the financial, safety and soundness performance of the credit union under the executives the fiduciaries hire.”
With that in mind, Dollar said that, regardless of whether the rule becomes effective or falls by the wayside during the Trump administration’s regulatory reform efforts, it is good business practice that every credit union take a good due diligence look at its succession plan.
“Keep it flexible, but cover the basics,” he said. “Assign all duties in the case of a vacancy. Establish a training regimen to prepare executives for vacancies when they come. Designate board committees and expectations in the event of a CEO search. Monitor likely retirement eligibility years. Affirmatively seek the next generation of board members.”
Premature Decisions
Dollar stressed that credit unions must not allow the scrutiny that might come from this new regulation, if implemented, to force it into premature decisions as to who should be the next CEO before the current one is ready to retire.
“That’s not what succession planning is all about and I worry that some examiners might think so if the rule becomes effective. Talk about destroying a good working team,” he said. “Try picking a new CEO before the old one has decided when to leave. The incumbent CEO is lame ducked. The designated next CEO begins acting like a CEO before taking the office. And every executive that didn’t get the nod starts sending out their resume.
“Again, recognize that the new regulation is passed by the NCUA board,” continued Dollar. “It may or may not become effective but it is a good occasion to perform some solid due diligence on your current succession plan. Or maybe to draft one if you don’t have one.
“But keep it flexible,” Dollar said, “and recognize that, even if this new NCUA regulation becomes effective at some point in the future and seems to be an attempt to indicate otherwise, the board and the CEO are still responsible for the vision and future leadership of the credit union. Not the examiner.”
Dollar encouraged credit unions that do not have a succession plan to follow his advice and develop one.
“Develop a succession plan that works for the specifics of your credit union before some future examiner starts asking for yours in 2026 or later if the rule is delayed but not repealed,” he said. “Whether it is an appropriate role for a regulatory agency to require such a plan and to determine through its supervisory authority that your plan meets their expectations—and I believe it is not, a well-thought but appropriately flexible succession plan is a best practice that should be followed voluntarily at every federally-insured credit union. The key is that it should be voluntary, specific to your credit union, flexible and driven by the fiduciaries of your credit union - the board, not your regulator.”