Crackdown On Big Exit Packages

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ALEXANDRIA, Va.-The NCUA Board, acknowledging mounting credit union losses, proposed restrictions last week on executive compensation packages for managers of troubled credit unions.

The Golden Parachute proposal comes as NCUA added another $16.6 million last month to losses at the National CU Share Insurance Fund, pushing year-to-date losses to a record $1.08 billion and threatening to push the fund's reserves below the 1.2% mark (dollars reserved per $100 of insured deposits), at which point Congress must be notified (CU Journal, July 26).

The Golden Parachute proposal, similar to one adopted for corporate CUs last year, would bar CUs from entering into lucrative retirement agreements with executives who may have contributed to the condition of a CU that has failed, been conserved, is undercapitalized or has been rated either CAMEL 4 or 5. "It is an important provision because it is another way to protect the members' funds," said NCUA Chairman Debbie Matz.

The proposal would exempt existing agreements on "nondiscriminatory" severance packages. That means executives who may have helped cause big losses would still be able to keep long-time retirement packages they have already earned, such as the $6-million severance package awarded WesCorp FCU CEO Robert Siravo after NCUA took over the failed corporate last year.

Growing Concerns

The proposal comes amid growing concerns that some executives that have overseen failed CUs are walking away with secret multi-million dollar severance deals after they engineer mergers into healthy institutions. Executives brought in to engineer such deals would be exempted.

The proposal was issued with an unusually short 30-day comment period, as NCUA seeks to adopt is as quickly as possible.

NCUA also announced a new public awareness campaign for the NCUSIF featuring well-known television finance guru Suze Orman, which will air on national TV, on radio and print starting in September.

NCUA reported last week there were three more failures of natural person CUs in June, making a total of 18 for the year. As a result, NCUA added another $16.6 million to its projected losses for the year. June's figures include an increase in six more CAMEL 4 and CAMEL 5 CUs, which includes three big institutions over $1 billion in assets.

The agency mailed all federally insured credit unions their invoices on July 21 for the $1.1 billion assessment for the corporate bailout and payments are due back by Aug. 20.

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