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Advanced Search About the Fed News & Events Monetary Policy Supervision & Regulation Payment Systems Economic Research Data Consumers & Communities Board of Governors of the Federal Reserve System The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system. Home > News & Events > Press Releases Joint Press Release March 30, 2011 Agencies seek comment on proposed rule on incentive compensation Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Federal Housing Finance Agency National Credit Union Administration Office of the Comptroller of the Currency Office of Thrift Supervision Securities and Exchange Commission For immediate release Share Federal financial regulatory agencies request comment on a joint proposed rule to ensure that regulated financial institutions design their incentive compensation arrangements to take account of risk. The proposed rule, which is being issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, would apply to certain financial institutions with more than $1 billion in assets. It also contains heightened standards for the largest of these institutions. In prohibiting incentive compensation arrangements that could encourage inappropriate risks, the proposal would require compensation practices at regulated financial institutions to be consistent with three key principles--that incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance. The proposed rule complements guidance previously issued by the agencies, including guidance on sound incentive compensation policies issued by the banking agencies last year. The agencies are proposing that financial institutions with $1 billion or more in assets be required to have policies and procedures to ensure compliance with the requirements of the rule, and submit an annual report to their federal regulator describing the structure of their incentive compensation arrangements. The agencies are proposing that larger financial institutions, generally those with $50 billion or more in assets, defer at least 50 percent of the incentive compensation of certain officers for at least three years and that the amounts ultimately paid reflect losses or other aspects of performance over time. For purposes of credit unions, large financial institutions would be defined as those with $10 billion or more in assets. The FHFA proposed that the incomedeferral provisions apply to all entities it regulates, regardless of size. The agencies request comments on the proposed rule within 45 days of its publication in the Federal Register, which is expected soon. Federal Register notice: HTML | PDF (380 KB) Comments: Submit | View Media Contacts: Federal Barbara Hagenbaugh 202-452Reserve 2955 202-898FDIC David Barr 6992 202-414FHFA Stefanie Johnson 6376 703-518NCUA Cherie Umbel 6330 202-874OCC Kevin Mukri 5770 202-906OTS William Ruberry 6677 202-551SEC Office of Public Affairs 4120 Last Update: March 30, 2011 BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM TOOLS AND INFORMATION Contact STAY CONNECTED About the Fed News & Events Monetary Policy Supervision & Regulation Payment Systems Economic Research Data Consumers & Communities Publications Freedom of Information (FOIA) Office of Inspector General Budget & Performance | Audit No FEAR Act Español Website Policies | Privacy Program Accessibility BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM 20th Street and Constitution Avenue N.W., Washington, DC 20551