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Client Alert | Feb 2011

FDIC Approves Rules to Implement Dodd-Frank Limits on Incentive Pay Risk at Financial Institutions

Guidance on regulations for the use of incentive compensation arrancements for exeuctives at financial institutions

The Federal Deposit Insurance Corporation issued new regulations that would create a framework for implementing and enforcing Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The intent is to control risk related to the use of incentive compensation arrangements (ICAs) for executives at covered financial institutions with consolidated assets of at least $1 billion.

Among the new requirements and restrictions:

  • Prohibition of ICAs to covered individuals that are considered to encourage inappropriate risk
  • Mandatory deferral and enhanced oversight for institutions with assets greater than $50 billion
  • Annual disclosure of the structure of ICAs
  • Policies and procedures to enforce Section 956
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