According to reports in today’s financial press, including the Wall Street Journal, the Federal Reserve is close to issuing a broad-based proposal to limit payment incentives for bankers. The proposal, which would apply to state-member banks subject to Federal Reserve Board supervision, reportedly will feature the use of clawbacks, and may encourage the use of stock options or restricted stock instead of other types of awards that would vest immediately. The draft proposal is intended to curb ostensibly profitable activities that can enrich employees in the short term while exposing the employer to undue risk. The proposal would not technically apply to state non-member banks, which are subject to the jurisdiction of the Federal Deposit Insurance Corporation, nor to federal savings banks, which are subject to the jurisdiction of the Office of Thrift Supervision. Nonetheless, we expect that the Federal Reserve’s proposal will be studied closely and perhaps adopted by other bank regulatory agencies. We will be following the proposal as details emerge.