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The NCUA Board on Thursday in a 3-0 vote released 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, it remains onerous and unnecessary.

Comments on the proposal are due July 22; NAFCU is reviewing the proposed rule as it plans for an official comment letter.

NCUA is the first of the federal financial industry regulators to reissue the proposal, which was first released jointly by the agencies in 2011 but was never approved in final form. Banks, securities firms and investment advisors are also affected, among others.

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.

Dan Berger, NAFCU's president and CEO, said despite revisions since the 2011 proposal, the one issued Thursday "adds a layer of reporting that is both burdensome to credit unions and unnecessary for effective regulatory oversight."

"NAFCU and our members support transparency but have had concerns about the incentive-based executive compensation rule since it was first proposed in 2011. We believed then, and do now, that this proposal is onerous and burdensome as applied to credit unions," said Berger.

NCUA Board Member Mark McWatters raised several questions about the proposal but voted with the other board members to issue it for comment.

The NCUA Board also received a report on the National Credit Union Share Insurance Fund and issued a proposed rule on credit union occupancy, or investments in fixed assets.

The meeting was the last one to be presided over by NCUA Board Chairman Debbie Matz, who steps down April 30.