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Dodd-Frank: Proposed Rules Issued Governing Incentive Compensation of Designated Executives

Proposed rules were issued jointly by several federal agencies, to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions and are deemed to be excessive or that may lead to material losses.?á Generally, the proposed rules apply to covered institutions, including national banks, state member banks, U.S. operations of a foreign bank with more than $1 billion in assets, and others.?á The proposed rules clarify that incentive-based compensation is “excessive” if the amounts are unreasonable or disproportionate to the services performed.?á An incentive-based compensation arrangement will be considered to encourage “inappropriate risks” unless it balances risks and financial rewards, is compatible with effective controls and risk management, and is supported by strong corporate governance.?á Covered institutions with at least?á$50 billion in assets must defer at least half of the incentive-based compensation of executive officers for… Continue Reading

February 2011
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