Newsroom

The interagency proposed rule on incentive-based compensation, released in April, is too broad and should not apply to credit unions, NAFCU President and CEO Dan Berger said in an official comment letter Thursday to NCUA.

The proposed rule is being promulgated under Section 956 of the Dodd-Frank Act, which was enacted to prevent a recurrence of the activities that led up to the financial crisis. Berger, in Thursday's letter, reiterated that credit unions did not participate in those activities. He also noted that credit unions and other small financial institutions will have difficulty covering the compliance costs associated with this proposed rule.

However, if the proposal moves forward, Berger said NCUA, along with the other federal financial industry regulators, should refine and improve current guidance on incentive-based compensation instead of promulgating new rules. If the rule moves forward, it should "reflect the unique business model of credit unions," he wrote.

The proposed rule would impose increased oversight and governance responsibilities on credit unions' volunteer boards, requiring them to conduct oversight of their credit unions' incentive-based compensation programs and approve incentive-based compensation arrangements for senior executive officers. "NAFCU believes the agencies should incorporate reasonable accommodations that reduce the rule's complexity so as to facilitate compliance for boards and management," Berger wrote.

He also urged revisions in the proposal's guidelines and definitions, for example, applying guidelines based on a credit union's riskiness, not asset size. Berger also said the seven-year records retention requirement seems overly stringent for some institutions.

Earlier this month, NAFCU Senior Regulatory Affairs Counsel Michael Emancipator recommended a public comment period extension of at least a 90 days.