FDIC PROPOSES LIMITS ON "GOLDEN PARACHUTES" AND INDEMNIFICATION PAYMENTS
FOR IMMEDIATE RELEASE
The FDIC Board of Directors today issued for public comment
a proposal that, with certain exceptions, would prohibit troubled
holding companies, banks and thrifts from making "golden
parachute" payments -- typically large cash amounts to executives
who resign just before an institution is closed or sold. The
agency also proposed limits on the ability of any holding company
or FDIC-insured institution to pay an employee's or director's
liabilities or legal expenses when that person is the subject of
an enforcement proceeding.
The proposed regulation would implement anti-fraud
legislation enacted in 1990 that permits the FDIC to "prohibit
or limit, by regulation or order, any golden parachute or
indemnification payment." The agency first issued proposed rule
changes in this area in 1991 but never voted on final rules,
initially because of a government-wide moratorium on rulemaking.
Given the passage of time and the many changes being
considered in the current plan, the FDIC has decided to issue a
second proposal for additional public comment. The new proposal
differs from the 1991 plan in several respects, including its
designation of unfunded "bona fide" deferred compensation plans
and severance payments of up to 12 months' salary as permissible.
The FDIC recognizes that certain golden parachute and
indemnification payments have reasonable business purposes. The
proposed regulation would provide guidance to the industry on which payments would be considered legitimate and which would be
considered abusive or improper.
Written comments on the proposed regulation will be
accepted for 60 days after it appears in the Federal Register.