Bankers are raising questions about executive compensation limits in the economic stimulus package, including whether they can pay bonuses that were earned last year and are now coming due.
Edward Yingling, the American Bankers Association's president, wrote in a letter sent Wednesday to Treasury Secretary Timothy Geithner that uncertainty over when the limits go into effect is wreaking havoc in the industry.
"Banks are uncertain as to whether they are prohibited from paying any bonuses earned for 2008 performance," the letter said.
Some institutions may have to hold off on filing 2009 proxy statements or restate last year's results, Mr. Yingling wrote.
The stimulus package says recipients of funds from the Troubled Asset Relief Program must abide by standards set by the Treasury secretary. The Treasury Department has not acted yet on the limits, and Mr. Yingling wrote that the ABA interprets that to mean the provisions are not effective until the department establishes standards.
Many community banks plan to file annual disclosures with the Securities and Exchange Commission as soon as this week, and their chief executives are wondering if they need to file written certifications about standards that have yet to be developed.
"We certainly understand the concerns expressed by the administration and the Congress about large bonuses that have been paid on Wall Street, but this new law is very complex in its reach and its effect on institutions of all sizes," the letter said. "Our industry is badly in need of immediate clarification."