Meeting for the first time with new Chairman Rodney Hood and new member Todd Harper, the National Credit Union Administration board signaled its intent Thursday to revise its regulation governing incentive compensation.
The last revision to the current compensation rule came more than 20 years ago. Since then, credit unions have “consistently expressed confusion” about what practices it allows, said Thomas I. Zells, a staff attorney with NCUA’s Office of General Counsel.
“The [rules] are likely outdated, burdensome and at odds with industry standards,” Zells told board members, who were holding their monthly meeting in Alexandria, Va.
Thursday’s meeting was the first with a full board since Debbie Matz left NCUA in April 2016. The
As things stand, the regulation imposes a blanket prohibition on compensation tied to lending. It does, however, allow for a series of exceptions — including one permitting payment of an incentive or bonus based on an institution’s overall financial performance. The problem is, NCUA has failed to clearly define what it means by “overall financial performance.” Adding to the confusion, examiners have enforced the rule unevenly, according to Zells.
“Credit unions have consistently expressed frustration in determining what loan metrics can be factored in to payments based on overall performance,” Zells said.
Similar confusion surrounds the other exceptions, he added.
Harper applauded the agency for seeking to clarify its own compensation regulation. The advance notice of proposed rulemaking, or ANPR, "demonstrates our collective commitment to solicit input from a wide range of stakeholders before making important policy decisions," he said.
"This is a somewhat complex issue, so we think an ANPR is the appropriate way to go," Deputy General Counsel Frank Kressman added.
Harper, though, criticized regulatory agencies, including NCUA, for
“I’m disappointed that nearly a decade after the passage of the Dodd-Frank Act federal regulators have failed to fully implement Section 956,” Harper said. “I’m hoping sometime in the near future we’ll be able to address that issue.”
As soon as the advance notice of proposed rulemaking is published in the Federal Register, industry stakeholders will have 60 days to comment.
Lucy Ito, president and CEO of the National Association of State Credit Union Supervisors, said the compensation issue was ripe for reconsideration.
“We were pleased to provide background information to the agency ahead of the ANPR and will closely examine it to supply additional comments on behalf of the state system,” Ito said Thursday in a press release.
Compensation was included in NCUA’s regulatory reform agenda as a tier 1 priority.
Hood, who was
Hood also praised Mark McWatters for his two years as chairman.
“I want to thank board member McWatters for his service as chairman and for his significant accomplishments leading this agency through a period of major transition,” Hood said.
McWatters had served as chairman since January 2017. His six-year term ends in August 2020.
