ALEXANDRIA, Va. — Federally insured credit unions that are insolvent, in conservatorship or have ratings of CAMEL 4 and 5 are prohibited from offering golden parachutes to their executives as a result of a rule unanimously approved by the NCUA Board on Thursday.
The agency defines golden parachutes as payments that are "contingent on the termination of that person's employment and received when the credit union making the payment is troubled, capitalized or insolvent."
Those would be banned at credit unions that are insolvent, in conservatorship or have ratings of CAMEL 4 and 5. All federally insured credit unions would be banned from paying legal or professional expenses incurred in federal or state administrative proceedings that result in a monetary punishment, cease and desist order.
Deferred compensation and retirement benefits would be allowed and credit unions could still take out liability insurance for executives and volunteers.
Exceptions can be made if the credit union gets permission from its state or federal regulator or uses a golden parachute to hire new executives to bring it back to sound financial health. They also could offer “reasonable severance payments’’ if an executive were losing his or her job as a result of an unassisted merger.
NCUA Chairman Debbie Matz said the rules, which are the same as those approved for corporate credit unions last fall, are “to protect credit union members, and prevent executives who caused problems or didn’t prevent problems from occurring from benefitting on their way out.’’
The NCUA Board also approved a rule that would place additional requirements on advertisements.
The rule requires that radio and television ads longer than 15 seconds carry the statement that deposits are insured by the NCUA, along with annual reports and other “statements of condition.’’ In print advertisements, the notice of insurance coverage can be no smaller than the smallest font used in the ad.
