Golden-goodbye payouts on Wall Street could be at risk under resurrected Financial Crisis era rule
U.S. financial watchdogs plan to take another crack at regulating Wall Street executives’ pay — an outstanding requirement of the 2010 Dodd-Frank Act that has repeatedly failed to materialize.
The Federal Deposit Insurance Corp. aims to vote on a measure in coming weeks, according to people with knowledge of the initiative, who asked not to be identified discussing confidential deliberations. Still, the rules would have to clear a half-dozen regulators before taking effect. Two prior campaigns to do so ended unsuccessfully.
The incentive-compensation rules, long resisted by the financial industry, are meant to curb risky behavior by forcing executives and other prominent employees to wait longer to cash out their bonuses. A prior proposal would have given companies as long as seven years to claw back pay tied to misconduct, even if the bonus were already vested. Financial firms would also have to give watchdogs additional details on pay packages that could be made available to the public.
Agencies previously proposed versions of the rule in 2011 and 2016. The renewed regulatory push was reported earlier by the Wall Street Journal.
While last year’s regional-banking turmoil stoked debates over the broader industry’s stability, finalizing executive-compensation rules would still be a big lift. Beyond the FDIC, imposing the rules would require action and approvals from the Federal Reserve, Office of the Comptroller of the Currency, Securities and Exchange Commission, Federal Housing Finance Agency and the National Credit Union Administration.
Each of the agencies would move at their own pace, and there’s no guarantee that all would complete the effort before November elections that could usher in a change in administrations. Still, some have signaled a willingness to try.
In response to a request for comment, an SEC spokesperson pointed to a December speech by agency Chair Gary Gensler in which he said: “We stand ready to work with our fellow regulators to fulfill this mandate and through re-proposing rules in this area.”
Representatives for the FDIC, Fed, OCC and NCUA declined to comment. A spokesperson for the FHFA didn’t immediately respond to a message.
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