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Compensation rule must address CU difference CUNA
WASHINGTON (6/1/11)--The National Credit Union Administration’s (NCUA) final rule on incentive-based compensation arrangements should distinguish between credit unions that have not rewarded undue risk taking and those financial institutions that have, the Credit Union National Association (CUNA) has said. Any burdens that this rule places on credit unions should be minimized, CUNA added in a Tuesday comment letter. The NCUA proposal seeks to ensure that the incentive-based compensation arrangements of credit unions with $1 billion or more in assets "appropriately balance risk and financial rewards," are "compatible with effective controls and risk management," and are "supported by strong corporate governance.” The compensation proposal, which is required by the Dodd-Frank Act, does not cover salaries or other compensation, such as bonuses, where risk is not involved. The proposed rule was jointly issued by the NCUA, the Federal Reserve, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Securities and Exchange Commission. CUNA in the letter said that credit unions have generally not provided the kinds of abusive compensation plans that are the subject of this proposal and that encouraged unmanageable risks, and added that many credit unions would likely not be subject to the rule, as they generally do not provide the type of compensation addressed by the proposal. However, CUNA still urged the agency to work with other regulators “to make important changes in the proposal that will recognize the significant differences between credit unions and other institutions regarding compensation arrangements that are the subject of this proposal.” CUNA also recommended that the agency revise and clarify its definitions of “executive officers” and “incentive-based compensation.” CUNA also called on the NCUA to exclude Credit Union Service Organizations (CUSO) from the final compensation rule. While the NCUA had not proposed including CUSOs under the rule, it did request input on whether or not CUSOs should be covered. The NCUA should also clarify which types of information financial institutions must include when they file compensation policy disclosures to the agency, CUNA added.


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