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Incentive compensation practices: a report on the horizontal review of practices at large banking organization

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Incentive compensation practices: a report on the horizontal review of practices at large banking organizations, October 5, 2011

  • “Risk-taking incentives provided by incentive compensation arrangements in the financial services industry were a contributing factor to the financial crisis that began in 2007. To address such practices, the Federal Reserve first proposed guidance on incentive compensation in 2009 that was adopted by all of the federal banking agencies in June 2010. To foster implementation of improved practices, in late 2009 the Federal Reserve initiated a multidisciplinary, horizontal review of incentive compensation practices at 25 large, complex banking organizations. One goal of this horizontal review was to help fill out our understanding of the range of incentive compensation practices across firms and categories of employees within firms. The second, more important goal was to guide each firm in implementing the interagency guidance.”
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