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July 06, 2016
NAFCU urges more comment time on incentive-based compensation
NAFCU Senior Regulatory Affairs Counsel Michael Emancipator on Friday urged NCUA to extend by at least 90 days the public comment period on its incentive-based compensation proposal.
The NCUA Board in April issued an interagency proposed rule aimed at preventing executive compensation that is excessive or could lead to material losses in credit unions. While revised from a 2011 proposal, in NAFCU's view, the 2016 version gives credit unions an extra layer of reporting that is burdensome and unnecessary.
In a letter Friday to the agency, Emancipator noted that more than 250 credit unions will be affected by the current version of the rule, not counting those credit unions that will surpass the $1 billion level by the rule's effective date.
"So that credit unions and other stakeholders can provide meaningful feedback and raise potential issues that the proposal does not contemplate, NAFCU strongly urges NCUA and the other regulatory agencies to extend the comment period by at least 90 days from the original comment deadline, to October 20, 2016," he wrote.
Comments on the proposal are currently due July 22.
The 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 the 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. Clawback provisions are also included.
The rule's requirements would not apply to credit unions below $1 billion in assets. NCUA says only 258 credit unions will be affected by the rule.
The NCUA Board in April issued an interagency proposed rule aimed at preventing executive compensation that is excessive or could lead to material losses in credit unions. While revised from a 2011 proposal, in NAFCU's view, the 2016 version gives credit unions an extra layer of reporting that is burdensome and unnecessary.
In a letter Friday to the agency, Emancipator noted that more than 250 credit unions will be affected by the current version of the rule, not counting those credit unions that will surpass the $1 billion level by the rule's effective date.
"So that credit unions and other stakeholders can provide meaningful feedback and raise potential issues that the proposal does not contemplate, NAFCU strongly urges NCUA and the other regulatory agencies to extend the comment period by at least 90 days from the original comment deadline, to October 20, 2016," he wrote.
Comments on the proposal are currently due July 22.
The 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 the 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. Clawback provisions are also included.
The rule's requirements would not apply to credit unions below $1 billion in assets. NCUA says only 258 credit unions will be affected by the rule.
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