Financial Regulators Push To Tie Down Wall Street Bonuses

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Juliegrace Brufke Capitol Hill Reporter
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The National Credit Union Administration, a Virginia-based federal credit regulator, unanimously voted in favor of a rule Thursday that would force some Wall Street executives to wait four years before they received their full bonuses.

Under the regulation, deferrals on incentive-based pay for companies’ significant risk-takers and senior executive officers would vary depending on the size of the institution. Top employees at banks holding total assets of more than $250 billion having 60 percent of their bonuses held. Employees at banks in the next tier, holding between $50 billion and $250 billion in consolidated assets, would be subjected to a three-year deferral at 50 percent.

“The deferred compensation part of the proposal is fairly consistent with how the largest U.S. banks currently defer compensation — many already already do for three or four years,” Dan Ryan, PricewaterhouseCoopers’ financial services advisory leader, told CNBC. “CEOs and boards may actually welcome this regulation because it makes their job easier — it creates a level playing field across the biggest banks for employee contracts.”

If the executives are found to be involved in any type of wrongdoing reminiscent of what led to the financial crisis, they would be forced to return the bonus.

“The proposed rule would require clawback provisions that, at a minimum, allow the covered institution to recover incentive-based compensation from a current or former senior executive officer or significant risk-taker for seven years … if the covered institution determines that the senior executive officer or significant risk-taker engaged in misconduct that resulted in significant financial or reputational harm …” the proposed regulation reads.

Under Dodd-Frank, the rule would have to be implemented in conjunction with five other agencies, including the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Securities and Exchange Commission.

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Juliegrace Brufke