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Highlights:
Covered financial institutions are those regulated by the Agencies with total consolidated assets of at least $1 billion. For these institutions, the NPR:
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prohibits incentive-based compensation arrangements that encourage inappropriate risks by providing covered persons with "excessive" compensation;
- prohibits incentive-based compensation arrangements that encourage inappropriate risk taking by providing covered persons with compensation that "could lead to a material financial loss" to an institution;
- requires disclosures that will enable the appropriate federal regulator to determine compliance with the rule; and
- requires the institution to maintain policies and procedures to ensure compliance with these requirements and prohibitions commensurate with the size and complexity of the organization and the scope of its use of incentive compensation.
For covered institutions with at least $50 billion in total consolidated assets, the NPR also requires:
- For "executive officers" (as defined in the NPR), deferral of at least 50 percent of incentive-based compensation for a minimum of three years. Deferred payments must be adjusted to reflect actual losses or other measures of performance that become known during the deferral period.
- For other covered persons that individually have authority to expose an institution to substantial risk, the board of directors must identify such employees; evaluate and document the incentive-based compensation methods used to balance risk and financial rewards; and approve incentive compensation arrangements after appropriately considering other available methods for balancing risk and financial rewards.
Distribution:
FDIC-Supervised Banks (Commercial and Savings)
Insured U.S. Branches of Foreign Banks
Suggested Routing:
Chief Executive Officer
Compliance Officer
Related Topics:
Interagency Guidance on Sound Incentive Compensation Policies issued on June 21, 2010
Attachment:
Notice of Proposed Rulemaking - PDF (PDF Help)
Contact:
Mindy West, Chief, at 202-898-7221, miwest@fdic.gov
George Parkerson, Senior Policy Analyst at 202-898-3648, gparkerson@fdic.gov
Daniel Lonergan, Counsel at 202-898-6971, dlonergan@fdic.gov
Rodney Ray, Counsel, 202-898-3556, rray@fdic.gov
Rose Kushmeider, Senior Financial Economist at 202-898-3861, rkushmeider@fdic.gov
Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2011/index.html.
To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters may be obtained from the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).
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