House Considers Exempting CU's Under $1B From Compensation Bill Posted by AVCU on 5:44 PM

Earlier today, the House Financial Services Committee considered H.R. 3269, the Corporate and Financial Compensation Fairness Act. The bill, as amended, was reported to the House with a favorable recommendation by a vote of 40-28. An amendment to exempt credit unions by Representative Baca (D-CA) was not offered following passage of an amendment limiting the bill to financial institutions over $1 billion in total assets. The bill will be considered on the House floor this coming Friday. CUNA is still seeking explicit exemption of all credit unions. Features of the bill are as follows:

Summary of H.R. 3269

Only one portion of the bill, Section 4, affects credit unions. It cover all credit unions, including state charters and privately-insured ones. NCUA would enforce the section for federally-insured credit unions; the FTC would be responsible for enforcement for privately-insured credit unions. The following is an overview.

Section 4 directs various federal financial regulators (including NCUA) to jointly prescribe regulations requiring financial institutions (including credit unions) to disclose information related to the structure of incentive based compensation structures. Regulations are to be prescribed within 270 days of the date of enactment. Specifically, the information disclosed to the regulators should be sufficient to determine whether the compensation structure:

1. Properly measures and rewards performance
2. Is structured to account for the time horizon of risks
3. Is aligned with sound risk management
4. Meets other criteria appropriate to reduce unreasonable incentives for officers and employees to take undue risks that could have serious adverse effects.

Section 4 also would give regulators the authority to prohibit any compensation structure or incentive based payment arrangement determined to encourage inappropriate risks by financial institutions that could have serious adverse effects on economic conditions or financial stability or could threaten the safety and soundness of the institution.