NCUA Eyes Curbs On Executive Pay

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ALEXANDRIA, Va. – NCUA said this afternoon it is undecided whether it follow the banking agencies’ lead in proposing a new rule prohibiting incentive-based compensation deals that encourage big risk taking by management.
The FDIC and the three other banking agencies, the Federal Reserve, Office of the Comptroller of the Currency, Office of Thrift Supervision–all of whom drafted the rule with NCUA–issued the rule for public comment today. The NCUA Board is scheduled to be briefed on the proposal next week.
The NCUA proposal would apply to all executive officers of large credit unions, the 175 institutions over $1 billion in assets. The proposed rule defines “executive officer” as a person who holds the title or performs the function of: president, chief executive officer, executive chairman, chief operating officer, chief financial officer, chief investment officer, chief lending officer, chief legal officer, chief risk officer, or head of a major business line.
The proposed rule is required under provisions of the Dodd-Frank Financial Reform Act which seeks to rein in excessive Wall Street compensation that was found to be tied, in many cases, to risky activities that caused some of the biggest losses during the financial crisis. The FDIC proposed additional provisions on the biggest banks, those over $50 billion, which would require those firms hold on to at least half the bonuses paid to top executives for three or more years.
But credit unions have also been tainted by allegations of risky behavior by bonus-seeking management. NCUA is suing executives of WesCorp FCU over claims the management of the one-time $34 billion corporate engage din risky activities to boost the corporate’s profits and earn big bonuses.
The proposed rule is supposed to be effective six months after publication of the final rule in the Federal Register, with annual reports due within 90 days of the end of each covered financial institution’s fiscal year.  

The other agency’s proposing the rule are the Securities and Exchange Commission and Federal Housing Finance Authority, the regulator for Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. 

ALEXANDRIA, Va. – NCUA said this afternoon it is undecided whether it follow the banking agencies’ lead in proposing a new rule prohibiting incentive-based compensation deals that encourage big risk taking by management.

The FDIC and the three other banking agencies, the Federal Reserve, Office of the Comptroller of the Currency, Office of Thrift Supervision–all of whom drafted the rule with NCUA–issued the rule for public comment today. The NCUA Board is scheduled to be briefed on the proposal next week.

The NCUA proposal would apply to all executive officers of large credit unions, the 175 institutions over $1 billion in assets. The proposed rule defines “executive officer” as a person who holds the title or performs the function of: president, chief executive officer, executive chairman, chief operating officer, chief financial officer, chief investment officer, chief lending officer, chief legal officer, chief risk officer, or head of a major business line.

The proposed rule is required under provisions of the Dodd-Frank Financial Reform Act which seeks to rein in excessive Wall Street compensation that was found to be tied, in many cases, to risky activities that caused some of the biggest losses during the financial crisis. The FDIC proposed additional provisions on the biggest banks, those over $50 billion, which would require those firms hold on to at least half the bonuses paid to top executives for three or more years.

But credit unions have also been tainted by allegations of risky behavior by bonus-seeking management. NCUA is suing executives of WesCorp FCU over claims the management of the one-time $34 billion corporate engaged in risky activities to boost the corporate’s profits and earn big bonuses.

The proposed rule is supposed to be effective six months after publication of the final rule in the Federal Register, with annual reports due within 90 days of the end of each covered financial institution’s fiscal year.  

The other agency’s proposing the rule are the Securities and Exchange Commission and Federal Housing Finance Authority, the regulator for Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.

 

 

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