ABA has again commented on the reintroduction of a 2016 proposed rule to create new limits on incentive compensation at certain financial institutions. In a letter sent Monday to the FDIC, OCC, National Credit Union Administration, and Federal Housing Finance Agency, ABA reiterated its concerns that the proposal does not reflect any of the issues raised by the industry when the proposal was first introduced eight years ago, nor does it have legal standing without the participation of all the required federal agencies.
Section 956 of the Dodd-Frank Act call for six agencies—the Federal Reserve, FDIC, OCC, National Credit Union Administration, Securities and Exchange Commission and Federal Housing Finance Agency—to issue regulations or guidelines to prohibit incentive-based compensation arrangements that encourage excessive risk-taking at financial institutions with at least $1 billion in assets. A 2016 proposal was reintroduced earlier this year by four of the agencies, but not the SEC or Fed.
ABA noted the lack of participation of the SEC and Fed as well as the decision by the remaining agencies to request comment through press release rather than publication in the Federal Register, as required by the Administrative Procedures Act. ABA also noted that the proposal is just a copy of the 2016 rulemaking that was never finalized, incorporating none of the recommendations and concerns raised by the industry when that proposal went through the public review process.
“We believe strongly in the importance of sound incentive-based compensation as a key part of prudent risk management. In connection with previous proposals to implement Section 956, ABA has … [expressed] the concerns of our members about the content of those proposals and, in the case of the current proposal, the process by which it was issued,” ABA wrote, adding that it “urges the agencies to adopt a regulatory approach that balances risk management with the ability to recruit and retain high-quality talent in a competitive, rapidly evolving market and to incent performance effectively.”
