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Readout on the NCUA's Fifth Board Meeting of 2024

Michael Christians • July 21, 2024

The National Credit Union Administration (NCUA), at its board meeting on July 18^th, took a number of actions. First, the agency approved maintaining the interest rate ceiling for federal credit unions at 18%.

Second, it approved a proposed rule that would impose restrictions on incentive-based compensation at federally insured credit unions. Those restrictions, applicable to institutions with at least $1 billion in assets, include, but are not limited to:

The credit union must not establish any incentive-based compensation plan that encourages inappropriate risk or provides a covered person with excessive compensation,
Its board of directors must approve all incentive-based compensation plans for senior executive officers and conduct ongoing oversight,
The institution must create annual reports detailing its incentive-based compensation plans and make those reports available to the NCUA upon request,
Most incentive-based compensation plans may not vest faster than on a pro rata annual basis,
Unvested incentive-based compensation shall be subject to downward adjustment or forfeiture in the event of poor financial performance or inappropriate risk taking, and
Incentive-based compensation must be subject to claw back for a period of at least seven years in the event it is determined that the covered person engaged in misconduct or fraud.

The requirements of the proposed rule would apply to any federally insured credit union the first day of the calendar quarter that begins at least 540 days from the date that it reaches at least $1 billion in assets.

Finally, the board re-proposed a rule that would implement succession planning requirements at all federally insured credit unions. Under the rule, each credit union must have a succession plan that covers its board of directors, supervisory committee, credit committee, chief executive officer, and other management officials. The plan must outline how the credit union plans to temporarily and permanently fill vacancies and outline the credit union’s strategy for recruiting qualified candidates. You can access that proposed rule here.

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