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Agencies Issue Proposal on Incentive-Based Compensation

Federal banking and credit union regulators are reissuing a proposal on incentive-based compensation, as mandated by the Dodd-Frank Act. The proposal aims to:

  • Prohibit incentive-based compensation arrangements at covered financial institutions that encourage inappropriate risks by providing excessive compensation or that could lead to material financial loss.
  • Require those covered financial institutions, defined as those with over $1 billion in assets, to disclose information concerning incentive-based compensation arrangements to the appropriate Federal regulator.

This Notice of Proposed Rulemaking (NPR) reintroduces the regulatory text initially issued in 2016 but never finalized. The proposal was issued by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Housing Finance Agency. The NCUA is anticipated to take action on the NPR soon, after which it will be published in the Federal Register for a 60-day comment period.

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