FDIC Issues Executive Compensation Proposal, NCUA and Others to Follow
Large credit unions and banks may face additional restrictions on executive compensation as a result of regulations that will be issued by the NCUA and other financial regulators.
The FDIC today issued a proposal for public comment requiring big banks to keep half of bonuses paid for three years in order to tie them to the employees' long-term performance. The NCUA is scheduled to be briefed on the issue at its Feb. 17 meeting and possibly send the proposed rule out for comment on that day.
The proposal, as sent out for comment today by the FDIC, requires "larger covered financial institutions,''--in the case of those credit unions with assets of $1 billion or more-- to report compensation information to their regulators, who will then rule if it is "excessive."
According to the FDIC summary, the rule "would prohibit a covered financial institution from establishing or maintaining any incentive-based compensation arrangements for covered persons that encourage inappropriate risks by the covered financial institution that could lead to a material financial loss.''
FDIC Chairman Sheila Bair said in a statement that the proposed rule would "help address a key safety and soundness issue which contributed to the recent financial crisis-that poorly designed compensation structures can misalign incentives and induce excessive risk-taking within financial organizations.
There is a 45-day comment period on the proposal.
In addition to the FDIC and the NCUA, the regulators issuing the regulations include the SEC, the Federal Reserve, the Comptroller of the Currency and the Federal Housing Finance Agency.