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NAFCU suggests NCUA allow flexibility on compensation programs
NAFCU – in a letter sent Friday – offered suggestions to improve the NCUA's rules on compensation in connection to lending. The NCUA in April issued an advanced notice of proposed rulemaking seeking public feedback on proposed changes.
The association also asks that the agency explicitly permits lending as a factor in compensation plans.
"NAFCU proposes several amendments to carry out the NCUA's intent while allowing credit unions the flexibility necessary to implement compensation plans that work best for their unique business models, including redefining 'overall financial performance' to include loan growth as part of the calculation," wrote NAFCU Regulatory Affairs Counsel Mahlet Makonnen. "Modernizing these regulations is critical for credit unions' governance because it will allow them to build well-balanced incentive plans that attract and retain talented employees and executives to help credit unions grow and better serve their communities."
Suggestions outlined in the letter include:
- modernizing section 701.21 (C)(8); and
- flexibility to develop methodology for compensation plans.
Makonnen also noted that while current regulations contain NAFCU-supported protections against conflicts of interest and also establish a framework to prevent loss to the National Credit Union Share Insurance Fund, "the compensation rule could be substantially improved by the recommendations below to incorporate lending as part of a broad and balanced set of organizational goals and performance measures."
For more on lending compensation rules, read a post on NAFCU's Compliance Blog here.