With considerable fanfare, the FDIC has passed and then quickly announced its proposed rules implementing Section 936 of the Dodd-Frank legislation – even before the other regulatory agencies could put their own imprimatur on the jointly developed proposal. Clearly the FDIC wants to make this a branding opportunity. But enough of inside-the-beltway politics.

The proposal takes some interesting approaches to its subject. The aspect that has received the most media attention is the part that applies to the largest banks. For financial institutions with $50 billion or more in consolidated assets, the proposal would require that, for any executive employee who receives incentive-based compensation, at least half of that must be in a form that is paid at least three years after it is earned. The details of who is covered by this rule, and how the deferred portion may be affected by developments during the three-year period, are discussed below. It is a reasonably precise and objective rule.