In addition to its work on revising the DIF, the FDIC today approved rules for incentive compensation structures at financial institutions with assets of $1 billion or more as required by section 956 of Dodd-Frank (see FSM Report COMPENSATION30). This interagency rulemaking has required the consent of seven federal regulators, resulting in protracted negotiations to reach this proposal, which may not be final yet. Although Chairman Bair believes that all substantive issues have now been resolved, comment will not begin until publication in the Federal Register, which could be weeks away. Acting OTS Director Bowman and Acting Comptroller Walsh only supported the proposal in their capacities as FDIC Directors, citing ongoing review without detailing any remaining controversies. In passing, Chairman Bair indicated that contingent capital would be an excellent form of deferred compensation, but she opposes its use as capital on grounds that debt is a funding source, not equity. This could well complicate U.S. action on the Basel “bail-in debt” rule (on which an in-depth report will shortly be provided to clients). The proposal anticipates that the final rule would be effective six months after its publication. This report analyzes today’s session.
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