Federal Regulators Zero In On Non-Exec Compensation Packages

NU Online News Service, March30, 4:18 p.m. EDT

Federal financial regulators are taking aim at large compensation packages paid to non-executives at financial institutions.

In a regulation proposed Wednesday, federal financial services regulators would bar incentive-based compensation that are excessive or that "could expose the institution to inappropriate risks that could lead to material financial loss."

The rule requires disclosure of incentive-based compensation arrangements for top executives.

It also establishes special rules for institutions with assets of more than $50 billion, and requires the boards, or committees of boards of large financial institutions, to monitor and oversee such compensation. Additionally, it requires deferral of parts of large compensation packages.

The rule was mandated by the Dodd-Frank financial services law.

The provision would require boards of institutions with assets of more than $50 billion to identify those persons other than top executives, that have the ability to expose the institution to possible losses "that are substantial in relation to the institution's size, capital, or overall risk tolerance."

The proposal would require that an institution's board of directors, or a committee of directors, of the institution approve the incentive-based compensation arrangement for non-top executives, and maintain documentation of such approval.