WWW.ABSTRACT.DISLIB.INFO
FREE ELECTRONIC LIBRARY - Abstracts, online materials
 
<< HOME
CONTACTS



Pages:   || 2 | 3 |

«Building Success. Together. 202-663-5042 uu hbenton Robert deV. Frier son Legislative and Regulatory Activities Division Secretary Office of ...»

-- [ Page 1 ] --

American

Bankers Hu Benton

t

3 Association Po|icy

Viœ President of B a n k

Building Success. Together. 202-663-5042

uu

hbenton@aba.com

Robert deV. Frier son Legislative and Regulatory Activities Division Secretary Office of the Comptroller of the Currency 400 7th Street, S.W.

Board of Governors of the Federal Reserve System Suite 3E-218 20th Street & Constitution Avenue, N.W. Mail Stop 9W-11 Washington, DC 20551 Washington, DC 20219 Docket No. R-1536 Docket No. OCC-2011-0001 RINNo. 7100 AE-50 RIN 1557-AD39 Robert E. Feldman Alfred M. Pollard Executive Secretary General Counsel Attention: Comments, Federal Deposit Attention: Comments/RIN 2590-AA42 Insurance Corporation Federal Housing Finance Agency 400 7th Street, S.W.

Federal Deposit Insurance Corporation 550 17th Street, N.W. Washington, DC 20219 RIN 2590-AA42 Washington, DC 20429 RIN 3064-AD86 Gerard S. Poliquin Brent J. Fields Secretary Secretary of the Board National Credit Union Association Securities and Exchange Commission 1775 Duke Street 100 F Street, N.E.

Alexandria, Virginia 22314-3428 Washington, DC 20549 Release No. 34-77776; IA-4383; File No.

–  –  –

Ladies and Gentlemen: The American Bankers Association1 (ABA) appreciates the opportunity to comment on the notice of proposed rulemaking (NPR) from the Board of Governors of the Federal Reserve System (Federal Reserve), the Office of the Comptroller of the Currency The American Bankers Association is the voice of the nation's $16 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $12 trillion in deposits and extend more than $8 trillion in loans.

American Bankers Association 1 (OCC), the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission (SEC), the National Credit Union Administration (NCUA) and the Federal Housing Finance Administration (FHFA)2 on "incentive-based compensation arrangements." Comments in this letter are drawn from discussions with representatives from ABA member banks of all sizes that would be subject to the NPR (covered banks).

Under Section 956(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), the Agencies are required to propose jointly "regulations or guidelines" for the respective institutions under their jurisdiction that "prohibit any types of incentive-based payment arrangement...[that] encourages inappropriate risks by covered financial institutions (1) by providing an executive officer, employee, director, or principal shareholder of the covered financial institution with excessive compensation, fees, or benefits; or (2) that could lead to material financial loss to the covered financial institution." Institutions having assets of less than $1 billion are exempt under Section 956(f). The NPR is a reproposal following an initial proposed rulemaking in April 2011.

ABA appreciates the significant effort the Agencies have made to address the many complexities inherent in managing compensation of bank officers, directors and employees.3 A well-managed compensation scheme must attract and reward talented employees, promote appropriate behavior and incent highly productive work. It must promote a correct balance between risk-taking (which is the core of the banking business) and risk management to protect the safety and soundness of the institution and the interests of its customers, its owners and the public. Given the significant impact of an institution's compensation scheme on its ability to meet these diverse objectives, it is inevitable that banking organizations will take a highly individualized approach to managing compensation. This approach acknowledges the widely varying circumstances of individual banks' business models and risk profiles, their resulting different risk management frameworks and the different competitive environments in which they operate (including the different talent pools in which they recruit to meet the needs of their specific business models).

ABA members are concerned, however, that the NPR not only fails to take account of this complex balancing process, but would actually threaten banks' efforts to achieve these objectives, including inhibiting successful risk management. As described in detail below, the Agencies' attempt to prescribe such detailed uniform standards for such a wide swath of the financial services industry seems to be based on assumptions about how banking organizations measure and manage risk and define the authority of broad groups of employees, when actual practice is much more diverse and in many cases dramatically different from the Agencies' assumptions. For example, a compensation framework that appears to be based on management systems applicable to securities trading platforms fits poorly or not at all with the risk management and governance that ABA members apply to the wide variety of other functions within their organizations. To attract, keep and manage talented employees, bank management must provide appropriate incentive compensation to many areas of the organization that bear little or no functional resemblance to a trading desk. Furthermore, the Agencies' attempt to standardize compensation schemes across a wide swath of the financial services landscape far We refer to the proposing agencies collectively as the "Agencies."





For simplicity, in this letter an institution's directors, officers and other employees are referred to as "employees," except where the context requires an explicit distinction.

–  –  –

ABA appreciates the Agencies' recognition of the special position of depository institutions and holding companies organized in mutual form and the accommodations made for them in the NPR. Today, there are over 540 mutually chartered institutions with $264 billion in assets across the country, ranging in size from well under $100 million to over $1 billion. Mutual banks are not subject to the pressures of stockholders interested in maximizing shareholder value, and thus have both a different universe of stakeholders and in some respects a different governance framework compared to stock institutions. Besides the lack of a class of equity interests and thus an inability to comply with those aspects of the NPR that apply to other institutions, mutual institutions in particular may have difficulty identifying compensation practices at similar, nonpublicly-traded financial firms, as the NPR recognizes. Mutual institutions take risk governance seriously, as do institutions in stock form. Discussions with ABA's mutual members reveal that their managers share the general concerns of the industiy expressed in this letter.

Key Concerns

• The proposed definitions of "significant risk takers" do not reflect how most employees' responsibilities and authorities are delimited.

o Because of market conditions and practices, certain classes of employees, e.g., those in sales, may receive high compensation relative to other employees without having authority to make final commitments on behalf of the institution and thus create risk exposure.

o Also, the authorized limits for employees who can commit the firm and create exposure often are expressed in terms other than as a percentage of the firm's capital, and cannot be accurately translated into terms based on capital.

• The proposed rule would require inappropriate treatment of compensation for employees with widely differing levels of responsibility based simply on their job titles; the titles might be appropriately used in a subsidiary or business line without implying the ability to create material risk for the consolidated organization.

o Definitions of "senior executive officer" by job title fail to take into account the responsibilities associated with those titles at subsidiaries of large organizations.

• The NPR raises numerous concerns in its treatment of consolidation of covered institutions that are holding companies. Resolution of compensation for risk takers and senior executive officers as noted above would, however, address or significantly mitigate many of the problematic aspects of the NPR's approach to consolidation.

• In addition to expanding the scope of employees to include those who do not significantly affect risk, the NPR's definitions of incentive-based compensation arrangements would unnecessarily include plans that do not incent risk-taking.

–  –  –

• The proposed restrictions on certain types of incentive compensation, e.g., brokerage fees for some types of employees, and on acceleration of payment in specified circumstances, will likely make banking organizations and other institutions subject to the rule uncompetitive with employers that are outside the Agencies' jurisdiction.

–  –  –

• The final rule should broaden the Agencies' reservation of authority to provide a procedure to exempt institutions whose lack of complexity warrants exclusion from coverage under the rule, analogous to the proposed authority to impose the rule on additional institutions whose operations appear to present special degrees of risk.

These points are discussed in greater detail in the sections below. After providing these details, ABA offers a concluding recommendation for simplified approach that would meet the requirements of DFA Section 956 and serve the industry's objectives of talent recruitment and retention, incenting of employee success and appropriate risk governance.

DISCUSSON

–  –  –

Both the "relative compensation test" and the "exposure test"4 are likely to sweep under the rule many individuals at numerous covered institutions who do not, in practice, have the potential to expose their employers to material risk. In the case of the relative compensation test, highly-paid individuals such as sales people for insurance products are paid in line with market practice (specifically compensation practices at competitors who would not be subject to the Agencies' final rule), but who do not commit the firm to contractual relationships or other risk - either they do not have approval authority for the transactions they originate, or, in some cases, they act as agents for unaffiliated parties such as insurance carriers. Their functions correlate badly or not at all with the expansion or mitigation of the firm's risk. To place them under the proposed incentive compensation rules on the basis of their total compensation relative to other employees would therefore not advance the purposes of the rule.

We also refer the Agencies to the comment letter submitted by the American Bankers Insurance Association, dated July 21, 2016, and its discussion of the proposal's application to insurance agents/brokers.

–  –  –

American Bankers Association 4 The "exposure test" will be extremely problematic in a different way, in both theoretical and practical terms. This risk measure appears to reflect the way securities traders' risk limits are typically set in broker-dealers and other securities firms. For most bank personnel, risk limits are not set in reference to ability to commit a specific amount of the firm's capital. In fact, for most risk takers in banks, it is not possible to convert their authorities into a capital-based measure, at least not without making assumptions that are likely to prove unrealistic or inaccurate, leading to results in conflict with the Agencies' intent. Moreover, risk limits are not expressed in terms of the capital of specific legal entities, but with reference to overall risk limits within a line of business. In short, the proposed measure bears no real relation to the way risk management is applied in most institutions and in significant business lines.

Rather than the two proposed "significant risk taker" tests, ABA recommends that the final regulation take a principles-based approach to identifying risk takers to be subject to the rule.

Because each covered institution has its own risk governance model, policies and procedures, the allocation of authority for business decisions is divided in ways that are unique to the institution.5 Accordingly, identification of risk takers is an exercise unique to each covered institution, and the "one size fits all" approach of the NPR would mean both over-inclusion (because relatively highly paid individuals whose duties do not give them control of significant risks will probably be included) and under-inclusion (because individuals whose authorities are not easily translated into capital commitment measures are likely to be omitted). A principles-based approach tailored to each institution, similar to that currently employed,6 would address both of these concerns. It would also offer two additional advantages: it would permit use of an existing governance process with which both institution management and supervisory staff are familiar, and it would meet the requirements of DFA Section 956, which specifically contemplates "guidelines" as acceptable to satisfy the statutory requirement.7 The principles could appropriately include downward adjustments and similar features to avoid encouraging inappropriate risks, as is done under current guidance and as required by DFA Section 956. In each case the program and its administration would be transparent to the covered institution's examiners.

II. The proposed definition of "senior executive officer" potentially includes too many employees who are not in a position to have a material effect on risk.



Pages:   || 2 | 3 |


Similar works:

«∋(9(/230(17 2) 6859(,//∃1&( 7(&+12/2∗ ∃1∋ 5,6. 2) ∃%86( 2) (&2120,&,1)250∃7,21 9ΡΟ  7ΚΗ ςΩ∆ΩΗ ΡΙ ΩΚΗ ∆ΥΩ ΛΘ ΦΡΠΠΞΘΛΦ∆ΩΛΡΘς,ΘΩΗΟΟΛϑΗΘΦΗ &20,17 ΡΙ ∆ΞΩΡΠ∆ΩΗΓ ΣΥΡΦΗςςΛΘϑ ΙΡΥ ΛΘΩΗΟΟΛϑΗΘΦΗ ΣΞΥΣΡςΗς ΡΙ ΛΘΩΗΥΦΗΣΩΗΓ ΕΥΡ∆ΓΕ∆ΘΓ ΠΞΟΩΛΟ∆ΘϑΞ∆ϑΗ ΟΗ∆ςΗΓ ΡΥ ΦΡΠΠΡΘ Φ∆ΥΥΛΗΥ ς∴ςΩΗΠς ∆ΘΓ ΛΩς...»

«ThyCa: Thyroid Cancer Survivors’ Association, Inc. www.thyca.org Manual: Starting a Thyroid Cancer Survivors’ Organization March 2010 Notes: Copyright (c) 2010, ThyCa: Thyroid Cancer Survivors’ Association, Inc.• You may photocopy this manual, or reprint part or all of the text, with credit to ThyCa: Thyroid Cancer Survivors' Association, Inc. (www.thyca.org).• This free manual is one of many free worldwide public services of ThyCa: Thyroid Cancer Survivors' Association, Inc....»

«Loughborough University Institutional Repository Model development in discrete-event simulation and system dynamics: an empirical study of expert modellers This item was submitted to Loughborough University's Institutional Repository by the/an author. TAKO, A.A. and ROBINSON, S., 2010. Model development in Citation: discrete-event simulation and system dynamics: an empirical study of expert modellers. European Journal of Operational Research, 207 (2), pp. 784 794 Additional Information: •...»

«Grivalia Properties REIC FINANCIAL REPORT for the nine month period ended September 30, 2015 This financial report has been translated from the original report that has been prepared in the Greek language. Reasonable care has been taken to ensure that this report represents an accurate translation of the original text. In the event that differences exist between this translation and the original Greek language financial report, the Greek language financial report will prevail over this...»

«A stochastic OT account of paralinguistic tasks such as grammaticality and prototypicality judgments Paul Boersma, March 18, 2004 It has been observed that grammaticality judgments do not necessarily reflect relative corpus frequencies: it is possible that structure A is judged as more grammatical than structure B, whereas at the same time structure B occurs more often in actual language data than structure A. In recent work (Boersma & Hayes 2001), we have used Stochastic Optimality Theory to...»

«Contents 1 Introduction 1 1.1 Scope of this unit 1 1.2 Structure of this unit 1 2 Rationale for Forecasting and Modelling 1 2.1 Demand Units for Transport Schemes 1 2.2 Forecasting 2 2.3 Modelling 3 2.4 Priorities 3 3 Data collection 4 4 Modelling 5 4.1 Introduction 5 4.2 The Standard Model Structure 5 4.3 The Demand Model 8 4.4 The Assignment Model 11 4.5 Interfaces between Demand and Assignment models 12 4.6 Alternative Model Structures 12 4.7 Mitigating Modelling Risks 14 5 Forecasting 15...»

«MARCH 14, 2016 TIGER TIDBITS A Note from the PTA: 3/14-Happy Birthday Mrs. Ahl! Happy Birthday to our beloved Head Tiger, Principal Ahl! Brookside families wish you a wonderful birthday, and thank you for your wonderful care and leadership! We are so fortunate to have you as our principal! *Note from the editor: While humbled, I am so appreciative of the very kind birthday wishes! Thank you to our incredible, supportive families. I am so lucky to work in partnership with all of you! March...»

«E GRAY RG S O O GE N Ad ars ye og t ra r5 ine for ove r Training Range Instructions Designed by George Grayson Chairman of the Dog Training Industry Association, UK.Products available from our training range: Safety Car Harness • multi-functional for exercise and as a car harness • high-visibility reflective strips • fully adjustable Complete Control Harness • helps control pulling • calms and controls excitable dogs • multi-functional for exercise and as a car harness • fully...»

«Gaia Data Release 1 Documentation release D.0 European Space Agency and Gaia Data Processing and Analysis Consortium September 20, 2016 Executive Summary We present the first Gaia data release, Gaia DR1, consisting of astrometry and photometry for over 1 billion sources brighter than magnitude 20.7 in the white-light photometric band G of Gaia. The Gaia Data Processing and Analysis Consortium (DPAC) processed the raw measurements collected with the Gaia instruments during the first 14 months...»

«CONSTITUTION OF THE BENTON ENGINEERING COUNCIL At the University of Florida (Revised September 2015) PREAMBLE By recognizing the importance of the development of engineering knowledge and skills for the continued advancement of ourselves, our University, our community, and human welfare in general; and by further recognizing the need for a student organization that unites the efforts of the respective societies to achieve these goals, We, the members as a united group, pledge ourselves to the...»

«167 t t Taevas (mdEM men’el’). Müütide järgi lõi *peajumal kai taeva läbipaistva ja helesinisena. Kurat (mdM äitan) heitis selle peale mustad rasked pilved. Seda märgates täitis kai need pilved veega ja käskis pilvedel aeg-ajal avaneda, kui maal on vaja värskendavat vihma. Ilmselt vene müütide mõjul kujutati taevast ette kristallkuplina. Kupli peal asus paradiis ja seal elas ka kai. Igavene valgus langes maa peale taevakuplis oleva augu kaudu. Paradiisitee kulges...»

«V. Rev. Fr. Oshagan Gulgulian, Pastor ST. SAHAG & ST. MESROB ARMENIAN CHURCH PARISH COMMUNITY LEADERSHIP DIRECTORY OFFICE Nominating Committee Auditing Committee 630 Clothier Road Phone  610.642.4212 Karen Cannuscio Margaret Ashekian Wynnewood, PA 19096 Fax  610.649.4892 Arpy Jones Elizabeth Barsamian Carol Leszczynski Edward Sarkisian Pastor Very Rev Fr. Oshagan Gulgulian, M. Div Sunday School Superintendants Alice Pakhtigian Greta Wiley Office Manager Anie Megerian Church Organization...»





 
<<  HOME   |    CONTACTS
2017 www.abstract.dislib.info - Abstracts, online materials

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.