Wall Street Bonus Pay Restricted Under U.S. Regulators’ Proposal

RSS Feed

Wall Street Bonus Pay Restricted Under U.S. Regulators’ Proposal

April 21st, 2016

Awake Goy

Wall Street executives would have to wait at least four years to collect most of their bonus pay and could be forced to return money if their companies lose big under rules being proposed to install one of the last major planks of the Dodd-Frank Act.

Financial companies with more than $250 billion in assets would face the toughest restrictions on pay for senior executives and other employees in a position to have major impact on the firm’s bottom line, according to the long-delayed incentive compensation measures released by the National Credit Union Administration. NCUA, one of the six agencies that must adopt the rules, is meeting Thursday for a vote that would release them for public comment. The other regulators, including the Federal Reserve and Securities and Exchange Commission, are expected to follow.

The proposal would allow companies to take back bonuses — even those already vested — if the employee took inappropriate risks, drew an enforcement action or exceeded a firm’s risk limits and caused a loss. Clawbacks of bonuses could happen for as long as seven years, including for those who have left the company, according to the proposal, which represents six years of combined work from regulators to interpret one of the core provisions of the 2010 law.

Skewed incentives played a key role in the 2008 credit crisis as financial-industry executives seeking the biggest possible payouts exposed their companies to mortal risk that led in many cases to disastrous consequences. Dodd-Frank demanded that regulators strangle those kinds of incentives as a way to help protect the financial system.