TO: NCUA Board
FROM: Office of General Counsel
DATE: December 10, 2024
SUBJ: Final Rule – Succession Planning (12 C.F.R. Parts 701 and 741)
ACTION REQUESTED: Board approval of the attached final rule, which will require federally insured credit union (FICU) boards of directors to establish succession planning processes for key positions.
DATE ACTION REQUESTED: December 17, 2024.
OTHER OFFICES CONSULTED: The Office of Examination and Insurance was consulted in the development of the proposed and final rules. The Office of Credit Union Resources and Expansion and the Office of National Examinations and Supervision were consulted in the development of the proposed rule, but their input was not solicited on the final rule given the limited changes from the proposed rule.
VIEWS OF OTHER OFFICES CONSULTED: The Office of Examination and Insurance provided several comments that are incorporated in the final rule.
BUDGET IMPACT, IF ANY: None.
SUBMITTED TO INSPECTOR GENERAL FOR REVIEW: Yes.
RESPONSIBLE STAFF MEMBERS: Summer Chapman, Policy Division Director, and John Berry, Policy Officer, Office of Examination and Insurance; Ariel Pereira, Senior Staff Attorney, Office of General Counsel.
SUMMARY: At its July 18, 2024, meeting, the Board approved a proposed rule to address succession planning at FICUs. The proposed rule was published in the Federal Register on July 25, 2024, and provided for a 60-day public comment period.1 The proposal followed publication of the Board’s earlier 2022 proposed rule on the same topic.2 The July 25, 2024, proposed rule was based on that earlier proposed rule but included several changes that the Board believes will further strengthen succession planning efforts for both consumer federal credit unions and consumer federally insured, state-chartered credit unions.
This final rule follows publication of a July 25, 2024, proposed rule and takes into consideration the public comments received on the proposed rule. The comment period closed on September 23, 2024, and the NCUA received 187 public comments on the proposal. Comments were received from individual FICUs, state and regional credit union organizations, credit union trade organizations, credit union consulting services providers, and individuals. Approximately 116 of the comments were form letters with nearly identical wording. The majority of commenters, while acknowledging the importance of succession planning and agreeing with the intent of the proposed rule, raised concerns about the need for succession planning regulations, as well as the specifics of the proposed regulatory amendments.
In response to comments, the proposal has been amended to provide that a board must review its succession plan no less than every 24 months, as opposed to the annual review that would have been required under the proposed rule. The rule has also been revised by removing loan officers and supervisory and credit committee members from the list of FICU officials that must be covered by the succession plans. In addition, non-substantive changes have been made to the wording used in the list of covered officials for purposes of clarity. Further, to help ensure that FICUs have the necessary time to develop their succession plans, the effective date of the final rule will be set as January 1, 2026.
The final rule will require that a FICU board of directors establish a written succession plan that addresses specified positions. The board of directors must review the succession plan in accordance with a schedule it establishes, but no less frequently than every 24 months. In addition, the succession plan must address the FICU’s strategy for recruiting candidates with the potential to assume each of the covered positions. The expectation is for a FICU to develop a succession plan that is consistent with its size and complexity. The NCUA will make available online a sample template for a succession plan that may be appropriate for some smaller FICUs, though all FICUs may benefit from it.
RECOMMENDED ACTION: The NCUA Board approve the attached final rule.
ATTACHMENT: Final rule and template.