On January 16, the U.S. Department of the Treasury issued interim final rules for reporting and recordkeeping requirements with respect to executive compensation standards under the Troubled Asset Relief Program’s Capital Purchase Program (CPP).
Pursuant to the new rule, an institution’s chief executive officer must certify annually within 135 days after the end of such institution’s fiscal year that the institution and its compensation committee have complied with the CPP’s executive compensation standards. Additionally, the new rules require that, within 120 days of the closing date of the Securities Purchase Agreement (SPA) between a financial institution and the Treasury, the CEO of such institution must certify that the compensation committee has reviewed the senior executives’ incentive compensation arrangements with the institution’s senior risk officers. This is required to ensure that the compensation arrangements “do not encourage senior executives to take unnecessary and excessive risks that could threaten the value of the financial institution.”
The certification required 120 days after the closing of an SPA and the annual certification at the end of the relevant fiscal year must be provided to the Troubled Asset Relief Program Chief Compliance Officer.