联邦监管机构重点聚焦金融机构薪酬制度外文翻译.docx

联邦监管机构重点聚焦金融机构薪酬制度外文翻译.docx

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联邦监管机构重点聚焦金融机构薪酬制度外文翻译

FederalRegulators’SpotlightFocuses

OnFinancialInstitutionPayPractices

ByBarbara-AnnGustaferroandDavidB.Miller

Asresearchers,policyanalystsandmembersofthebankingindustrycontinuetodebatetheactualextenttowhichbankcompensationpracticesledtothefinancialcrisis,federalbankingregulatorshavemovedforwardwitheffortstorequirebankingorganizationstoreconsiderand,inmanycases,revisetheirincentivecompensationpaydesignandpractices.

ThepushbytheFedanditscounterpartfinancialregulatorstoaddressbankpaycomesaslittlesurprise.Inearly2009,mediareportsoflargebonusesbeingpaidtobankerswhoseemployershadreceivedbailoutfundsundertheTroubledAssetsReliefProgram（TARP）ignitedapublicfuroroverexecutivecompensationatfinancialinstitutions.TheFederalReserveanditscounterpartfinancialregulatoryagenciescameunderafirestormofcriticismforhavingallowedrunawaybonusstructuresinthefinancialindustrytofuelheedlessrisktakingwhichultimatelyresultedintheeconomicmeltdown

Evenifbankpayisfoundnottohaveplayedasignificantroleintheeconomiccrisis,theFedappearsdeterminedtoavoidbeingaccusedofinactiononthissubject.Itissupportedinitseffortsbysomefinancialeconomistswhoseeincreasedgovernmentoversightoffinancialinstitutioncompensationasessential,pointingtocertainfactorsthatmakebanksparticularlysusceptibletoimprudentrisktaking

Becausebanksmakemoneybyhavingtheirdepositsflowtothoseinneedofcapital—andbythesametoken,don’tmakemoneyiftheydon’t—theytend

totakeonahigherproportionofdebtrelativetotheirequity.Althoughitisnormallythecasethatshareholderswillenjoytheupsideofrisktakingwhiledebtholderswillbearmostofthedownside,inthecaseoffinancialinstitutions,debtholderswillbedisproportionatelyvulnerablerelativetoshareholders

.Government-provideddepositinsurancemakesbanks’creditorslesslikelytodemandthatbanksholdasmuchcapitalastheywouldabsentsuchinsurance.

Themoralhazardof“toobigtofail”:

Largeorsophisticatedfinancialinstitutionsmaybeparticularlywillingtotakeondangerouslevelsofrisk,inthehopesofbiggerpayoffs,becausetheybelievethat,intheworst-casescenario,thegovernmentwillhavenochoicebuttosavethebankfromcollapseinordertoavoidthegreaterconsequentialharmtotheeconomyatlarge.Bankersandtheirshareholdersstandtoreaptheupsideofrisktaking,withthedownsidebeingbornebytaxpayers.Thiscreatesthepeculiarincentiveforfinancialinstitutionsdeliberatelytomakethemselveslargeandcomplexinordertoassurethemselvesofthissafetynet.

WellbeforetheadoptionoftheDodd-FrankAct2inJuly2010,theFedhadalreadylauncheditsowninitiativetorequirefinancialinstitutionstoreexamine,andwhereappropriate,revisetheircompensationpracticeswithregardtoriskandrisktaking.InOctober2009,theFedissuedProposedGuidance3onthissubject,followedinJune2010byFinalGuidance4,thestatedpurposeofwhichis“tohelpensurethatincentivecompensationarrangementsofbankingorganizationsdonotencourageimprudentrisktakingandareconsistentwiththesafetyandsoundnessofthoseorganizations.”

FinalGuidanceAffectsFullArrayofBankingOrganizations

IncontrasttotheProposedGuidance,whichwasissuedbytheFedaloneanddealtsolelywithcompensationpaidbyinstitutionsunderitssupervision,theFinalGuidance,whichwasissuedjointlybytheFed,theOfficeoftheComptrolleroftheCurrency,theFederalDepositInsuranceCorporationandtheOfficeofThriftSupervision（collectively,the“Agencies”）,appliestothewiderangeofbankingorganizationscollectivelysupervisedbythoseagencies,includingUSbankholdingcompanies,nationalbanks,statememberandnonmemberbanks,savingsassociations,savingsandloanholdingcompanies,andtheUSoperationsofforeignbanks.

IncontrasttotheProposedGuidance,whichwasissuedbytheFedaloneanddealtsolelywithcompensationpaidbyinstitutionsunderitssupervision,theFinal

Guidance,whichwasissuedjointlybytheFed,theOfficeoftheComptrolleroftheCurrency,theFederalDepositInsuranceCorporationandtheOfficeofThriftSupervision（collectively,the“Agencies”）,appliestothewiderangeofbankingorganizationscollectivelysupervisedbythoseagencies,includingUSbankholdingcompanies,nationalbanks,statememberandnonmemberbanks,savingsassociations,savingsandloanholdingcompanies,andtheUSoperationsofforeignbanks.

AlthoughtheFinalGuidanceaffectsafargreaternumberofinstitutionsthantheProposedGuidance,manyofthoseinstitutions—smallercommunitybanksandthrifts—willescapetheburdensplacedonlargebankingorganizations（LBOs）,fromwhommuchmorewillbeexpectedintermsofsystematic,formalizedpolicies,proceduresandsystemsdesignedtoidentifyandavoidimprudentrisktakinginincentivecompensationpractices

FinalGuidanceRetains“Principles-Based”toFinancialInstitutionIncentivePay

TheProposedGuidancehadbeenorganizedaroundseveralcoreprincipleswhichwereintendedtoassureabalanceofriskandfinancialresults,andsupportfromcorporategovernanceandotherstructurestohelpmaintainthatbalance.AtthattimetheFedexpresslydidnotattempttoproscribeorendorsespecificincentivecompensationprogramsorstrategiesorimposespecificpaycapsorotherrestrictions.Inoptingforaprinciples-based,ratherthancategorical,approach,theFednonethelessinvitedpubliccommentastowhetheramoreformulaicapproachtoincentivecompensationdesignmightbeappropriate—forinstance,mandatorydeferralsofacertainpercentageofpay,orarequirement

thatacertainpercentageofpaybeintheformofequityawards

Havingreceivedthosecomments,theAgencieshaveretainedthesameprinciples-basedapproachforaddressingrisk-managementinincentivecompensationdesignandadministrationintheFinalGuidance.TheAgenciesexpresslydeclinedinvitationsfromcertaincommenters,ortofollowtheapproachtakenunderTARP,toimposedollarlimitationsortobanoutrightcertaincompensationpractices,includingeventhose,suchasgoldenhandshakesandgoldenparachutes,popularlytargetedasabusiveorexcessive.Indoingso,theAgenciesexpressedconcernthata“onesizefitsall”solutionthatfailedtoaccountfordifferencesinbusinessactivities,risksandemployeesgroupsacrossanorganization,couldleadtotheimprudentrisktakingtheguidancewasmeanttodiscourage.Atthesametime,theFinalGuidancerequiresabankingorganizationthatbelievesitneedsanyofthesepracticesforrecruitmentorretentiontoconsidertheirpotentialforexcessiverisktaking.

Likewise,whetherduetotheAgencies’excessivecaution,fearthatanyexceptionwouldbeexploitedorotherreason,theAgenciesrefusedtherequestofcertaincommenterstotreatsomeemployeegroups—forinstance,tellers,administrativeassistants,employeeswhoprocessbutdonotoriginatetransactions—asexemptbydefinitionfromtheuniverseofemployeesconsideredtobesubjecttotheguidance.TheFinalGuidanceappliesto“coveredemployees,”whichincludeanyemployee,seniorexecutiveorotherwise,whoindividuallyoraspartofagroup,hastheabilitytoexposethebankingorganizationtomaterialamountsofrisk.Anemployee（orgroupofemployees）willbedeemedtohavethatabilityiftheemployee’s（orgroup’s）activitieseitherarematerialtotheorganization,orarematerialtoabusinesslineoroperatingunitthatisitselfmaterialtotheorganization.Theunwillingnessoffederalfinancialregulatorstoexemptfrompossiblescrutinyincentivecompensationpaidtoanyemployeegroup,regardlessofitssizeortypeofroleintheorganization,hasbeenvexingtomanybanks,whichremainskepticalthatthelevelofriskposedbythosepayarrangementsjustifiestheintrusionandcomplianceburdenstowhichtheyarebeingsubjected.5

AlthoughtheAgencieshaveretainedtheflexibleprinciples-basedapproachoftheProposedGuidanceintheFinalGuidance,theguidancealsomakesplainthatsuchflexibilitydoesnotextendtoanydeviationfromthoseprinciples.Bankingorganizationshavebeenandremainconcernedthatcompliancewiththeguidancewillplacethematacompetitivedisadvantagerelativetootherentitiesinthefinancialservicesindustry,domesticallyandinternationally,thatarenotsubjecttothesamerestrictions.ButtheAgenciesfirmlyrejectedtherequestmadebycertaincommentersthatbankingorganizationsbepermittedtoadoptcompensationarrangementsthatmaybeinconsistentwithsafetyandsoundnesswheresucharrangementis,inthebankingorganization’sjudgment,necessarytorecruitorretainexecutivetalent.Instead,theAgenciessaythattheyintendtocontinueworkingwiththeirdomesticandinternationalcounterpartsforsoundincentivecompensationpracticesacrossthefinancialservicesindustry,andfurthernotethattheFinalGuidanceisconsistentwithPrinciplesforSoundCompensationPractices6andtherelatedImplementationStandards7publishedbytheFinancialStabilityBoardin2009.

TheProposedGuidancehadenunciatedthreeprinciplesaimedatcurbingexcessiverisktakinginincentivecompensationbymakingriskandriskoutcomesacentralfocusofincentivecompensationdesignandadministration:

•Incentivepayshouldappropriatelybalanceriskandreward,

•Effectivecontrolsandriskmanagementshouldsupportandreinforcebalancedincentivecompensationprograms,and

•Strongcorporategovernanceshouldbolsterincentivecompensation.

Thesesamethreeprinc