The new rule requires the chief executive officer (CEO) to certify annually within 135 days after the financial institution’s fiscal year end that the financial institution and its compensation committee have complied with the standards.
Not only that, within 120 days of the closing date of the Securities Purchase Agreement between the financial institution and the Treasury, the CEO is required to certify that the compensation committee has reviewed the senior executives’ incentive compensation arrangements with the senior risk officers to make sure these arrangements do not encourage senior executives to take unnecessary and excessive risks that could threaten the value of the financial institution.
According to a government news release, the financial institution is also required to keep records to substantiate the certifications for at least six years following each certification and provide these records to the TARP Chief Compliance Officer upon request.
Treasury first published CPP executive compensation regulations in October 2008. The rules generally apply to the chief executive officer, chief financial officer, plus the next three most highly compensated executive officers.
The interim final rule also makes a few clarifications and a technical amendment to the October interim final rule (See Bail Bonds? ).
Treasury also issued today a revised version of the executive compensation guidelines applicable to financial institutions participating in programs for Systemically Significant Failing Institutions to add similar compliance reporting and recordkeeping requirements as in the CPP Interim Final Rule.
In addition, Treasury is issuing Frequently Asked Questions relating to the executive compensation standards to assist financial institutions’ compliance.