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Agencies Seek Comment on Proposed Rule on Incentive Compensation

​Joint Release - March 30, 2011

Federal financial regulatory agencies request comment on a joint proposed rule to ensure that regulated financial institutions design their incentive compensation arrangements to take account of risk.

The proposed rule, which is being issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, would apply to certain financial institutions with more than $1 billion in assets. It also contains heightened standards for the largest of these institutions.
 
In prohibiting incentive compensation arrangements that could encourage inappropriate risks, the proposal would require compensation practices at regulated financial institutions to be consistent with three key principles--that incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance. The proposed rule complements guidance previously issued by the agencies, including guidance on sound incentive compensation policies issued by the banking agencies last year.
 
The agencies are proposing that financial institutions with $1 billion or more in assets be required to have policies and procedures to ensure compliance with the requirements of the rule, and submit an annual report to their federal regulator describing the structure of their incentive compensation arrangements. The agencies are proposing that larger financial institutions, generally those with $50 billion or more in assets, defer at least 50 percent of the incentive compensation of certain officers for at least three years and that the amounts ultimately paid reflect losses or other aspects of performance over time. For purposes of credit unions, large financial institutions would be defined as those with $10 billion or more in assets. The FHFA proposed that the income-deferral provisions apply to all entities it regulates, regardless of size.
 
The agencies request comments on the proposed rule within 45 days of its publication in the Federal Register, which is expected soon.
 

Media Contacts:

Federal Reserve Barbara Hagenbaugh
(202) 452-2955
​FDIC
David Barr
(202) 898-6992
​FHFA Stefanie Johnson
(202) 414-6376
​NCUA Cherie Umbel
(703) 518-6330
​OCC
Kevin Mukri
(202) 874-5770
​OTS
William Ruberry
(202) 906-6677
​SEC Office of Public Affairs (202) 551-4120

 



NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the U.S. Government, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 97 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. At MyCreditUnion.gov and Pocket Cents, NCUA also educates the public on consumer protection and financial literacy issues..

--NCUA--

National Credit Union Administration

Office of Public & Congressional Affairs

703.518.6330
pacamail@ncua.gov

Contacts:

John Fairbanks
Office: 703.518.6336
jfairbanks@ncua.gov

Ben C. Hardaway
Office: 703.518.6333
Mobile: 703.298.5223 bhardaway@ncua.gov

Kenzie Snowden
Office: 703.518.6334
ksnowden@ncua.gov

"Protecting credit unions and the consumers who own them through effective regulation"