Comments for NCUA’s Proposed Succession Planning Rule Slowly Coming In

During its July meeting, NCUA Board members voted 2-1 approving a proposed rule requiring credit unions’ boards of directors to “establish and adhere to processes for succession planning” for federally insured credit unions.

The rule, which is an expansion of a February 2022 succession planning rule, was published in the Federal Register for public comment. As of Wednesday, only four comments have been posted and the deadline for comments is Sept. 23.

Also on Wednesday, America’s Credit Unions posted a message for its members to submit comments on the succession planning proposed rule. The organization provided links for legacy CUNA and legacy NAFCU members to file responses. The two organizations merged into America’s Credit Unions at the beginning of 2024.

According to the NCUA, the proposed rule would require boards at federally insured credit unions “to establish written succession plans that address specified executive and other positions.”

“These include members of the board and supervisory committee, as well as management and assistant management officials, senior executive officers, and members of the credit committee and loan officers when they are involved daily in the review of loans,” America’s Credit Unions posted.

All four comments published in the Federal Register were posted on Aug. 11. Two of the four comments are in favor of the proposed rule, one comment appeared to be skeptical of the rule and one comment simply stated, “Interested.”

One comment posted on the Federal Register stated, “Excellent and necessary step towards good governance. My suggestion would be that you name the Chief Financial Officer as a separate line item, instead of including that position under the Chief Executive Officer listing. This is a substantial and essential position to plan for. The annual review by the Board of the succession plan is sufficient. This type of planning is being done across the spectrum of banking and insurance, as well as other corporate settings. This is long overdue.”

In a 10-page comment letter filed by an organization named Olden Lane, it stated, “As a general matter, we support the NCUA Board’s efforts to emphasize the importance of succession planning to the proper continuity of credit unions. However, we believe that the Proposed Rule is too ambitious.”

The comment continued, “At the outset, as a philosophical matter, we are not opposed to the NCUA’s rulemaking in this area, and we do not quibble with its legal authority. However, we note that its justification – based on ‘a compelling safety and soundness case’ and, therefore, the overall protection of the National Credit Union Share Insurance Fund (NCUSIF) – is quite general and not the most persuasive case we have heard for continued regulatory creep.”

At the time of approval by the NCUA Board in July, Chairman Todd Harper said, “Succession planning is vital to the long-term success of any institution, including credit unions. A credit union board’s failure to plan for the transition of its management and key decision-makers could come with high costs, including the potential for an unanticipated merger of the credit union when key personnel depart. In my view, it’s better to maintain many small credit unions serving a wide variety of purposes and niche markets than continuing to consolidate credit unions into ever larger institutions.”

READ MORE: Comments filed concerning the NCUA’s succession planning proposed rule