Long Overdue Banker Pay Reform Resurrected
WASHINGTON, D.C. – Four banking agencies announced today that they are advancing a long-delayed banker pay reform required by the 2010 Dodd-Frank Wall Street Reform and Consumer Act. The Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Federal Housing Finance Agency are re-proposing a bank executive compensation rule from 2016 that was never finalized. Bartlett Naylor, financial policy advocate for Public Citizen, released the following statement:
“Credit these four banking agencies for moving this necessary, statutorily mandated, and long overdue reform. But check to see if the windows are fogged at the Federal Reserve, where they may be unable to see that bad compensation structures lead to banker misconduct. They and the Securities and Exchange Commission are supposed to be part of this rulemaking.
“Bankers crashed the economy in 2008 because they were paid to, but the problem didn’t end there. Wells Fargo’s fake account scandal stemmed from bonus systems based on growth. Goldman Sachs bribed the Malaysian government to win bloated underwriting fees. And last year, Silicon Valley Bank (SVB) failed after its pay plan led it to sell a hedge against rising interest rates, as observed by the Fed itself. In fact, the Fed’s 90-page report on SVB mentions compensation more than 60 times. A Public Citizen report documented the link between pay and misconduct over the last decade.
“The 2016 proposal came close to needed reform. It required deferral of a significant portion of senior banker pay subject to forfeiture in the event of misconduct or other inappropriate banking decisions, but left the forfeiture up to management. Forfeiture must be mandatory. Bankers who screw up aren’t going to dock their own pay.”