Interagency final guidance on incentive compensation

For more information contact Frank C. Bonaventure at (410) 347-7305, Penny Somer-Greif at (410) 347-7341, or your Ober|Kaler attorney.

On 21 June 2010, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation (collectively, the ‘Agencies’) issued final guidance designed to ‘ensure that incentive compensation arrangements at financial organizations take into account risk and are consistent with safe and sound practices’[1] and to ‘assist banking organizations in designing and implementing incentive compensation arrangements and related policies and procedures that effectively consider potential risks and risk outcomes.’[2] The Federal Reserve proposed the guidance last year, as discussed in our 22 October 2009 client alert, and was joined by the other banking regulators in issuing the final guidance. The guidance, which applies to all banking organisations that the Agencies supervise, will be effective upon publication in the Federal Register.