FDIC board to vote on bank compensation, new insurance fees

The Federal Deposit Insurance Corp.'s board of directors meets Monday to vote on a proposed rule to limit executive pay and a final rule to impose higher fees on bigger lenders, the agency said today.

The board has been considering new rules to ban pay practices that encourage what regulators consider excessive risk-taking. The rules, required under the U.S. Dodd-Frank financial overhaul law which was enacted in July, are expected to require more deferred compensation for bank executives.

Congress and the FDIC also decided to change the fee structure for the insurance fund, which has been in deficit as a result of a wave of bank failures that followed the 2008 financial crisis. The board voted in December to increase the fund's reserve ratio to 2 percent of insured deposits nationwide.

Under the rule, how much individual banks are assessed to replenish the fund will be based on their total assets, not just their deposits. As a result, larger banks are expected to begin to pay proportionally more.

The FDIC, Federal Reserve, Securities and Exchange Commission and four other agencies are required to complete the pay rules by April.

The proposals will follow compensation guidelines issued by regulators in June. They said a review of pay practices found many big banks to be "deficient" in curtailing the risk-taking that fueled the crisis.

As a result, a "substantial portion" of incentive pay for senior executives at large banks should be deferred more than a year, the guidelines said, with payment dependent on the company's and individual's performance.

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