The Federal Reserve (“Fed”) has issued proposed regulations that would set "clear expectations" for banking organizations concerning their incentive compensation arrangements and related risk management and governance processes. The new guidelines propose that Fed examiners review whether these arrangements and processes are consistent with the guidance, and possibly impose enforcement action if they are not.
The regulations would require banks to reassess their current compensation plan design and ensure that their processes for establishing, modifying and monitoring incentive compensation arrangements comply with the proposed Principles of a Sound Incentive Compensation System. Additionally, banks would be required to conduct regular internal reviews and internal audits to ensure compliance with established policies and controls relating to incentive compensation arrangements.
See full Press Release.
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