NCUA—along with other federal financial regulators—issued a Notice of Proposed Rulemaking (NPR) to address incentive-based compensation arrangements, as required under section 956 of the Dodd-Frank Act. The NCUA is expected to act on the NPR soon.
The proposed rule includes prohibitions intended to make incentive-based compensation arrangements more sensitive to risk, including a prohibition on arrangements that do not include risk adjustment of awards, deferral of payments, and forfeiture and clawback provisions.
Section 956 requires the appropriate federal regulators to jointly prescribe regulations or guidelines with respect to incentive-based compensation practices at certain financial institutions that have $1 billion or more in assets. Once the NPR is adopted by all six agencies, it will be published in the Federal Register with a comment period of 60 days following publication.
