Rule will allow regulator to claw back pay from bosses
Regulators will be able to claw back some pay from top US financial executives if their company is liquidated by the government, under a rule adopted by the Federal Deposit Insurance Corp (FDIC).
FDIC board members voted unanimously yesterday to finalise the rule, which is part of the agency's expanded authority under the Dodd-Frank Act to resolve the largest financial firms.
"We need shareholders and creditors out there conducting their own due diligence and asking the tough questions of executives and management," FDIC chairman Sheila Bair said.
The rule authorises the FDIC to recover pay for the two years preceding its appointment as receiver from senior executives and directors "substantially responsible" for the firm's failure.
Dodd-Frank, the financial-regulation overhaul enacted last July, expanded the FDIC's resolution authority from winding down failed banks to also untangling the affairs of systemically important nonbanks when they collapse.