Succession plan mandate would result in ‘unworkable one-size-fits-all approach’

NCUA’s strategic planning proposal is “wholly inappropriate” as a regulation, though may be helpful to some credit unions as guidance. America’s Credit Unions Regulatory Advocacy Senior Counsel Luke Martone filed comments with NCUA Monday expressing these concerns, based on feedback from numerous member credit unions. In partnership with state Leagues, more than 150 credit unions also submitted comment letters as of Monday.  

The proposal would require credit unions to establish and adhere to processes for succession planning. It expands on a 2022 proposal applying to state-chartered credit unions, broadening the scope of individuals that must be covered in the succession plan.

“We vigorously push back against the need for and appropriateness of a succession planning mandate by the NCUA,” Martone wrote. “Despite the proposed language that the complexity of a succession plan be commensurate with the federally insured credit union’s size, complexity, and risk of operations, the mere mandate for a succession plan will result in an unworkable one-size-fits-all approach that simply will be of no benefit to some federally insured credit unions while introducing additional risk to others. It is necessary to understand that the systemic risk established by a lack of a succession planning mandate—as proffered by the NCUA—simply does not exist.

America’s Credit Unions agrees succession planning is an important component of a credit union’s strategic plan. Martone adds that NCUA examiners already review a credit union’s succession planning as part of the management component of the CAMELS rating system, “making this rulemaking redundant.”

Should NCUA proceed with a succession planning rulemaking, the NCUA should:

  • Clarify what steps a board of directors would be expected to take to achieve a “working familiarity” with a credit union’s succession plan;
  • Be clear about the potential impact on a credit union if an examiner determines a credit union’s succession plan to be inadequate;
  • Ensure confidentiality of a credit union’s succession plan; and
  • Provide clarity on the steps a credit union should take if it is unable to adhere to its succession plan.

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