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Top executives at the biggest Wall Street firms would have to wait four years to collect most of their bonus pay and could be forced to return the money in the event of wrongdoing, under proposed rules unveiled by federal regulators.

The rules, which were released Thursday by the National Credit Union Administration for public comment, say senior executives at firms worth more than $250 billion must wait to collect 60 percent of their bonus pay.

Executives at firms valued at $50 billion to $250 billion would have to wait three years to receive half their bonuses.

The rules cover banks, investment advisers and credit unions, as well as mortgage giants Fannie Mae and Freddie Mac.

Once executives receive their bonuses, they can be forced to return them if it later turns out they took inappropriate risks or engaged in actions that got their firms in legal trouble.

Many big Wall Street firms already delay bonuses for three years and allow bonus "clawbacks" in the event of wrongdoing by executives, but these practices would be codified as federal law.


The new bonus regulations were mandated under the Dodd-Frank financial overhaul, to address one of the big concerns raised by the subprime housing crisis, according to 

"There is evidence that flawed incentive-based compensation practices in the financial industry were one of many factors contributing to the financial crisis," the draft read. It added:

The regulations were crafted by six federal agencies, all of which must now sign off on them. One of those agencies, the Federal Deposit Insurance Corp., is expected to vote on the rules Tuesday.

 that the process of writing the regulations took regulators years to finish because of "the wide differences in pay practices in the industries they oversee":



Financial industry officials say the new rules will make it harder to attract top talent and exacerbate the flight of people away from banking, 

 reported.
"Already, the industry says it has seen people leave more traditional banking jobs for areas where compensation has gone untouched, such as hedge funds and startups, including in Silicon Valley," the 

Business and Economic News

Jim Zarroli

Author

Executives who get their firms in legal trouble could be forced to pay back bonuses retroactively.

Feds propose tougher rules governing Wall Street bonuses

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