# NCUA Proposes New Succession Planning Rule for Credit Unions
The National Credit Union Administration (NCUA) has proposed a new rule that would require federally insured credit unions to establish formal succession plans for key leadership positions. This move aims to strengthen the credit union system by ensuring continuity of leadership and reducing unplanned mergers.
## Key Points of the Proposed Rule
1. **Applicability**: The rule would apply to all federally insured credit unions, including both federal credit unions and federally insured state-chartered credit unions.
2. **Covered Positions**: Credit unions must develop succession plans for:
- Board members
- Supervisory committee members
- Credit committee members (if applicable)
- Management officials
- Senior executive officers
3. **Plan Requirements**: Succession plans must include:
- Titles of covered positions
- Expected vacancy dates
- Plans for temporarily and permanently filling vacancies
- Strategies for recruiting candidates
4. **Board Responsibilities**: Credit union boards must:
- Approve the written succession plan
- Review and update the plan at least annually
- Document any significant deviations from the plan
5. **Scalability**: The requirements are designed to be scalable based on the credit union's size and complexity.
## Why This Matters
The NCUA cites lack of succession planning as a factor in about 32% of credit union mergers. By requiring formal succession planning, the agency aims to:
- Reduce unplanned mergers
- Promote leadership continuity
- Strengthen the overall credit union system
## Resources for Credit Unions
Recognizing that this new requirement may be challenging for some credit unions, particularly smaller ones, the NCUA plans to provide:
- Training resources
- A sample succession plan template
- Technical assistance through its Small Credit Union Support Program
## What's Next
The NCUA is seeking public comment on the proposed rule. Credit unions and other interested parties have 60 days from the rule's publication in the Federal Register to submit their feedback.
## Bottom Line
While the NCUA's intention to strengthen the credit union system is commendable, the burden of this new rule appears to outweigh its potential benefits. The requirement for formal succession planning will impose significant additional administrative work on credit unions, particularly smaller institutions that may already be struggling with limited resources.
The NCUA estimates an annual burden of 10 hours per credit union to comply with this rule, which may be an underestimate for many institutions. This time could arguably be better spent on direct member service or other operational improvements. Furthermore, many credit unions likely already have informal succession planning processes in place that are tailored to their specific needs and organizational culture.
While succession planning is undoubtedly important, mandating a one-size-fits-all approach through regulation may not be the most effective way to address the issue. Credit unions might be better served by voluntary guidance and resources rather than a new regulatory requirement. As the comment period progresses, it will be crucial for credit unions to voice their concerns about the potential burden of this rule and suggest alternative approaches that could achieve the NCUA's goals without imposing undue regulatory burden.
Listen to an audio book of the entire rule HERE.
Comments