A Direct Line Blog

Adapted from the NCUA board meeting summary memo

At their July meeting, the NCUA Board approved a proposed rule that requires boards of directors at federally insured credit unions to establish and adhere to processes for succession planning. This new proposed rule modifies the 2022 proposal based on the public comments received and upon further consideration of the issues.

“Succession planning is vital to the long-term success of any institution, including credit unions,” Chairman Harper said. “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.”

Under the revised proposal, boards of directors at federally insured credit unions would be required to establish written succession plans that address specified executive and other positions. Additionally, each board of directors would be required to review the succession plan in accordance with a schedule it establishes, but no less than annually. The plan would be required to address the credit union’s strategy for recruiting candidates to assume each of the key positions and promote the credit union’s safe and sound operation.

The NCUA Board encourages all credit unions, regardless of asset size, to have a succession plan to fill key positions and ensure continuity of their operations. These succession plans should be consistent with the size and complexity of the credit union. The proposed rule includes a suggested succession plan template that may be appropriate for smaller credit unions.

The proposal is available for comment for approximately two months. We will keep you posted when a final rule is released with an effective date.