Yet another powerful financial regulator could soon exert its weight on the structures banks use to determine their executives' pay. The Federal Deposit Insurance Corp. next week will consider a proposal to link the deposit insurance fee it levies on each bank with the "risk profile" of the bank's compensation packages.
Says Thursday's Wall Street Journal:
The plan, if adopted by the regulator, could serve as both a carrot and a stick for lenders. Banks with compensation structures the FDIC views as less risky, such as those that allow firms to claw back pay from executives, could be given a break on the fees they pay on deposit insurance. Firms that have pay structures the FDIC views as giving officials an incentive to put the company at more risk could be forced to pay more.
The agency's plan specifically involves compensation for "executives," a word that lately has come to mean many things to many people. Traders, loan officers, and investment bankers - each of whose jobs requires placing their employer's capital at risk - are among professional categories whose pay plans have come under under the microscope in various rules and proposals.
The FDIC's board is set to vote to propose the plan on Jan. 12, according to the Journal. The paper notes that the agency has great leeway in how it levies fees, and "it might be difficult for financial companies to block any effort."
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