WASHINGTON - After three years in regulatory limbo, a plan limiting the exit packages paid to officials at ailing banks is being resurrected by the government.
The Federal Deposit Insurance Corp. plans to resurrect its golden parachute regulation within a month, according to an agency spokesman.
The original proposal, which was unveiled in 1991 to resounding criticism from the industry, fell victim to a Bush administration-imposed moratorium on new rules.
Because the new proposal varies significantly from the original plan, the FDIC will solicit another round of comments from the public before putting the regulation in final form.
A separate, broader proposal governing how much even healthy banks may pay executives is being reintroduced by all the banking agencies. The Federal Deposit Insurance Corporation Improvement Act of 1991 instructed the regulators to set compensation standards.
The agencies published proposed standards for comment in November 1993. But they did not follow through on the regulation because the community development bill enacted last year allowed them to issue guidelines rather than stricter regulations.
Robert F. Miailovich, an associate director in the FDIC's division of supervision, said the agency is likely to issue a regulation warning banks that "excessive compensation" can pose a risk to safety and soundness. Attached will be a set of guidelines that define how much compensation is excessive.
Mr. Miailovich said this rule is likely to be finished by the end of February.
While the golden parachute rule will only apply to troubled institutions, it has wider interest, said Ronald Glancz, a partner at the Washington law firm Venable Baetjer Howard & Civiletti.
"I think every CEO nowadays, in light of what we've been through . . . sees this as important," he said.
The unfinished golden parachute proposal, born of the Bank Fraud Act of 1990, has created confusion, Mr. Miailovich noted.
He said the FDIC was prompted to act now "first, by stories of abuse and number two, the existence of this law has been creating uncertainty."
One story of "abuse" may be the $17 million golden parachute dangling before Glenn Orr, who is leaving as CEO of Southern National Corp. after its merger with BB&T Financial Corp. is approved by the regulators.
While the Federal Reserve is handling the merger application, the FDIC's regional director in Atlanta, Lyle Helgerson, criticized the golden parachute in a letter to the Fed.
The deal "could set an undesirable precedent for the financial institutions industry," Mr. Helgerson said. The FDIC refused to release a copy of the letter, which was obtained by North Carolina's Triangle Business Journal.