NCUA To Bar 'Golden Parachutes' In Face Of Growing CU Losses
ALEXANDRIA, Va. - The NCUA Board, acknowledging mounting credit union losses, proposed restrictions this morning 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 for 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.
The Golden Parachute proposal, similar to one adopted for corporate credit unions last year, would bar credit unions from entering into lucrative retirement agreements with executives who may have contributed to the condition of a credit union 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.
The proposal comes amid growing concerns that some executives that have overseen the failures of their credit union are walking away with secret mult-million dollar severance deals after they engineer mergers of their credit unions into healthy institutions. Executives brought in to engineer such deals would be exempted from the new prohibition.
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 and supplant last year's campaign with Jane Bryant Quinn. The Suze Orman TV spots, one 30 seconds and another 60 seconds, will start airing in September.