WASHINGTON (2/14/11)--As the National Credit Union Administration (NCUA) prepares to look at executive compensation rules later this week, the Credit Union National Association (CUNA) is urging the agency to consider credit unions’ significant concerns before issuing any proposal. CUNA acknowledged that inaccurate early reports of what is covered by the rule may have added confusion to the debate. However, the trade group underscored that there are a series of legitimate issues to be addressed prior to the agency finalizing a draft, which is expected to be considered at this Thursday’s open meeting. As background, the Dodd-Frank Wall Street Reform law requires the federal financial regulators to issue a joint rule or guideline on incentive-based compensation arrangements. The rule or guideline is not meant to address general compensation like salaries, but rather targets such things as commissions paid to certain employees or officials for undertaking investments, making loans or other activities that expose the institution to high risk. The Federal Deposit Insurance Corp. (FDIC) led the pack last week by issuing its version of the joint rule. In a communication to NCUA Chairman Debbie Matz, CUNA highlighted the following concerns:
* Credit unions generally have not been engaged in the kinds of abusive arrangements addressed under Dodd-Frank, and the NCUA’s rule should distinguish credit unions from other types of institutions such as banks and others that have provided such arrangements to their employees and others officials. For example, the Board should fully consider whether guidelines could be issued for credit unions, even if the other regulators issued a regulation for the entities they regulate. * The FDIC proposal would apply certain prohibitions regarding incentive-based compensation to banks with $50 billion or more in assets. The proposal indicates credit unions with assets of $1 billion and more would be covered by these prohibitions. The NCUA should correct this and not have a rule that would potentially subject relatively smaller credit unions to standards that only apply to the largest banks. * The definition of “incentive-based compensation” should not be so broad that it could be misconstrued in implementation or possible enforcement.
CUNA asked for Matz’s leadership to make the limited nature of the proposal clear and to minimize its impact since credit unions generally have not been engaging in the types of practices the law and proposal seek to address.