A proposed rule to limit incentive-based compensation arrangements – first proposed in 2011, modified in 2016 and now coming forward again – will be considered by the federal credit union regulator’s board when it meets Thursday.
The proposal was outlined in the agenda for National Credit Union Administration (NCUA) Board’s meeting, set to start at 10 a.m. ET in Alexandria, Va., and released late last week.
A notice of proposed rulemaking was issued May 6 by the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Federal Housing Finance Agency (FHFA). NCUA said then that it was “expected to take action on the NPR in the near future.”
According to a release issued by NCUA in May, the 2024 NPR re-proposes the regulatory text previously proposed in June 2016, and seeks public comment in the preamble on certain alternatives and questions.
The proposal was first made in 2011, but then modified and reproposed in June 2016 by the federal financial institution regulators, including NCUA. The proposal, according to the agencies, would implement section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). That law generally requires that the regulators jointly issue regulations or guidelines that do two things:
- Prohibit incentive-based payment arrangements that the agencies determine encourage inappropriate risks by certain financial institutions by providing excessive compensation or that could lead to material financial loss;
- Require those financial institutions to disclose information concerning incentive-based compensation arrangements to the appropriate federal regulator.
The NCUA Board will also consider at its Thursday meeting a proposed rule on succession planning and the federal credit union (FCU) loan interest ceiling.