America’s Credit Unions pushes back against NCUA’s proposed succession planning rule

In July, the NCUA passed (2-1) a proposed rule on succession planning which would require the board of every federally insured credit union to “establish and adhere to processes for succession planning.” This new proposed rule was an updated version of the same rule that was proposed in February of 2022, which was then altered after reviewing credit unions’ comments.

While many feel the rule is unnecessary, the NCUA claims that many credit unions—especially smaller ones under $10 million in assets—lack proper succession plans and are therefore more likely to either 1) merge or 2) become insolvent. The rule cited the declining number of credit unions overall and the rising number of mergers as grounds for developing the rule.

“Accordingly, the failure to adequately plan for changes in leadership can jeopardize the continued viability of a FICU, potentially resulting in the unplanned merger of the FICU or other disruptions to safe and sound operations upon the departure of key personnel,” the rule stated, going on to later note that, “An NCUA analysis found that poor succession planning was either a primary or secondary reason for almost a third (32 percent) of FICU consolidations.”

However, America’s Credit Unions are now pushing back against the rule, arguing that added regulation on the topic was not only redundant, thanks to the CAMELS rating system which includes succession planning in the management segment of the review, meaning credit unions are all rated for their succession planning system already—but that the one-size-fits-all approach will only harm credit unions instead of helping them.

 

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