By Karey Wutkowski
WASHINGTON, Jan 12 (Reuters) – U.S. banks whose compensation plans encourage risk-taking would have to pay more for deposit insurance under a proposal floated by the Federal Deposit Insurance Corp on Tuesday.
The proposal is very preliminary and was contentious even among the members of the FDIC board, which is made up of regulators for different-sized financial firms. The board voted 3-2 to seek public comment on the proposal.
The plan would reward pay structures that tie banker pay to long-term performance and include “clawback” provisions to recoup payments.
Likewise, banks with risky payment schemes, including huge cash components and incentives for short-term results, would have to pay more in insurance premiums.
The proposal, which is not guaranteed to lead to rulemaking, said the FDIC would not seek to impose a specific level of compensation. Also, it would not require banks to provide more than a minimal amount of data, in an attempt to lighten the burden of the proposal.