Proposed regulations governing incentive-based compensation punish credit unions, and the NCUA has provided inadequate rationale for its rules.
Those are among the complaints by trade associations and credit unions sent in comment letters to the agency.
NAFCU President/CEO Fred Becker wrote that "there is virtually no justification for treating credit unions more strictly than other financial institutions."
He noted that it "simply does not make sense that the compensation arrangements at an $11 billion credit union should come under closer scrutiny than the compensation arrangement at a $49 billion bank or investment firm. Indeed, the recent evidence indicates that natural person credit unions generally require less regulatory oversight than larger, more complex institutions."
NASCUS Senior Vice President Brian Knight and CUNA Assistant General Counsel Luke Martone echoed that sentiment.
Under the proposed regulation, large credit unions would have to file an annual report on incentive-based compensation programs and couldn't have any programs that encourage exposure to inappropriate risks.
Credit unions with $1 billion or more in assets couldn’t have programs that might lead to material loss and have to document their compliance procedures. Credit unions with assets of $10 billion or more would have to meet all those requirements and defer at least 50% of their incentive-based compensation for at least three years and adjust payments to reflect subsequent losses caused by the decisions.
CUNA’s Martone noted that "no rationale has been provided by NCUA to justify a threshold for credit unions that is different from the one proposed for banks."
Pentagon Federal CU Chairman James Quinn wrote that requiring only certain credit union executives to be subject to the withholding provisions is "to suggest that we are of less honesty and integrity than our banking brethren. There is no basis in fact for this."
He also recommended that the agency coordinate with the IRS to determine how a bonus subject to the deferral rule would be treated for purposes of individual income tax.
NASCUS’ Knight urged that the final rule mandate that the agency work with state regulators to enforce the regulation. He also recommended a change to ensure that it addresses only "material incentive-based compensation," not small bonuses provided to a wide range of employees.