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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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