Compliance Blog

Alexander Monterrubio, Director of Regulatory Affairs

Good morning!

I want to introduce myself as the new Director of Regulatory Affairs here at NAFCU. I'm very excited about the opportunity to work with all of you in a new role and to continue advocating on behalf of NAFCU's members!

My first meeting as Director was a significant one, not only was it the last Board meeting for Chairman Debbie Matz the longest serving NCUA Board member in the agency's history but the Board issued two highly-anticipated proposals.

Incentive-Based Executive Compensation

The Board released an interagency proposal intended to eliminate incentive-based executive compensation packages that are deemed excessive or could lead to material losses. This is the second version of the rule, the predecessor of which was initially proposed in 2011 but stalled and never reached finalization.

It is important to remember, this proposal would not apply to credit unions below $1 billion in assets as these institutions are expressly exempted by statute. For credit unions above the asset threshold the proposal includes grandfather provisions for incentive-based compensation arrangements beginning prior to the rule's effective date, which would be 18 months following publication in the Federal Register.

Credit unions with $1 billion or greater in assets would fall under the rule's requirements, which include prohibitions from establishing any incentive-based compensation plans that are excessive or could lead to a material loss as well as maintaining records on incentive-based compensation plans for a period of seven years.

The proposal also includes additional prescriptive regulatory requirements for any credit union with $50 billion or greater in assets.

Occupancy (aka Fixed Assets)

The Board also issued a proposed occupancy rule, previously known as the fixed-assets rule, which would give credit unions more flexibility to take advantage of mixed-use buildings typically found in urban areas. Similar to NAFCU's suggestions to the agency, the proposal would modify the existing definition of partially occupy to only require a federal credit union, and any CUSO which it owns a controlling interest in, to use at least fifty percent of the premises within six years of purchasing the property.

NAFCU's regulatory affairs team will continue to analyze these proposals to determine their full impact on credit unions, so stay tuned!

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NCUA Litigation Settlements

This month, NCUA announced three additional litigation settlements related to the sale of faulty securities to corporate credit unions. These three settlements include $575 million from Goldman Sachs, $69.8 million from UBS, and $50.3 million from Credit Suisse. These settlements, combined with the agency's previous recoveries, have brought NCUA's total legal recoveries in securities cases to $3.1 billion.

As NCUA announces more recoveries many credit unions have already begun to ask when their institutions will see refunds. The answer is not for a while. 

Because funds borrowed from Treasury must be repaid prior to any distribution to credit unions, the agency has indicated that credit unions should not expect refunds until 2021 at the earliest, when all funds are expected to be repaid to Treasury.