FOR IMMEDIATE RELEASE:                          CONTACT:  Erica Hurtt           

January 22, 2010                                             (202) 457-8783

FORUM STATEMENT ON INDUSTRY COMPENSATION PRACTICES

WASHINGTON, D.C. – The Forum agrees with the Obama Administration, the Federal Reserve, and the G-20 that executive compensation policies at banking organizations should recognize senior management’s critical role in controlling risk and should align the personal incentives of executives with the long-term performance and safety and soundness of the employing institution. 

In that regard, the industry has taken concrete steps to: 1) ensure that compensation policies at banking organizations are aligned with the standards articulated by the G-20 as reflected by the Federal Reserve in its Proposed Guidance on Sound Incentive Compensation Policies; and, 2) provide appropriate disclosure of our compensation practices to shareholders. 

Specifically, compensation at member organizations has been structured in such a way so that as an executive becomes more senior and/or has greater decision-making authority with regard to risk, a progressively larger portion of that executive’s overall compensation is awarded on a deferred basis typically in the company’s stock, the terms of which may include risk mitigants such as vesting over a period of years, being subject to recapture or claw-back for improper actions that have a materially adverse financial impact on the organization or the executive’s business unit, or being subject to significant transfer restrictions.  Through compensation policies, member organizations seek to meaningfully align the personal incentives and priorities of the executive with the long-term profitability, viability, and safety and soundness of the institution. 

The Forum looks forward to working with the Administration, the Federal Reserve, and the G-20 toward the goal of assuring that executive compensation policies at member organizations do not encourage excessive risk-taking and are consistent with institutional safety and soundness, and the stability of the broader financial system.

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