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Wall Street to see tighter pay regs

New proposals for curbing Wall St. pay
New proposals for curbing Wall St. pay

It's going to take longer on Wall Street to pick up a full bonus check, if the National Credit Union Administration gets its way.

The regulator of credit unions proposed rules Thursday to increase the number of years it takes for incentive-based compensation to fully vest to four from the current three.

"Congress mandated action in this area because there were financial institutions which failed as a result of excessive risk-taking that was encouraged by incentive-based compensation arrangements which rewarded senior officials based on the volume of business they generated, regardless of whether the institution subsequently made or lost money on that business," the agency's vice chairman Rick Metsger said in a statement.

"Now as we all know, credit unions were not a primary cause of the financial crisis. They were primarily victims, which is why the NCUA took the lead in becoming the first financial institutions regulator to sue the Wall Street banks whose actions led to the crisis."

A pedestrian carries an umbrella while walking past the New York Stock Exchange.
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The proposed regulations would break down differently for banks of certain sizes. The largest banks on Wall Street, or those that contain $250 billion and more in assets, require that for four years, 60 percent of senior executives' pay is deferred and that for "significant risk takers," 50 percent incentive pay is deferred.

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For banks under $250 billion in assets, requirements for deferred compensation are slightly less onerous for executives. With the exception of death or disability, there is no way under the agency's proposal to speed deferred compensation.

The rules, initially required under the Dodd-Frank Act, were first proposed in 2011. The agency is the first to offer proposed rules.

Other agencies, including the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Federal Reserve Board of Governors, the Treasury Department's Office of the Comptroller of the Currency and the Securities and Exchange Commission, will also weigh in. A comment period on NCUA's proposal will run until July 22.

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"The deferred compensation part of the proposal is fairly consistent with how the largest US banks currently defer compensation -- many already already do for three or four years," said Dan Ryan, PwC's financial services advisory leader. "CEOs and boards may actually welcome this regulation because it makes their job easier — it creates a level playing field across the biggest banks for employee contracts."

CNBC's Mary Thompson contributed to this report.

UPDATED: This story was updated to include comments from Dan Ryan at PwC.