What is the intention of compensation as an element of risk assessment?
Ellis: We have seen some poorly designed compensation programs that reward bank employees for conducting transactions that increase the risk profile of the bank and that, in some cases, can even lead to the failure of the institution. The FDIC Board issued an Advance Notice of Proposed Rulemaking (ANPR) on incentive compensation in January of this year. The FDIC’s goal in issuing the ANPR was to solicit ideas on how to use the deposit insurance pricing system to complement supervisory standards by providing incentives for banks to adopt employee compensation programs and practices that align the employee’s incentives with those of the FDIC and other bank stakeholders. AFP: What can AFP members do to enlist the FDIC’s support on banks passing their assessment charges onto customers, or banks contacting a regulator to discuss the matter further? Ellis: Although the FDIC does not endorse the practice, FDIC rules do not preclude insured institutions from passing their assessment fees onto
