Letter to the Federal Reserve, FDIC, and OCC Asking for a Financial Analysis on Re-Proposal on Incentive Compensation

Dear Chair Yellen, Chairman Gruenberg, and Comptroller Curry:

The U.S. Chamber of Commerce (the “Chamber”) is the world’s largest business federation, representing the interests of more than three million businesses and organizations of every size, sector, and region. The Chamber created the Center for Capital Markets Competitiveness (“CCMC”) to advocate for policies to promote efficient capital markets, including strong corporate governance policies.

While the CCMC will file substantive comment letters on the re-proposed Incentive-Based Compensation Arrangements rule (the “Re-proposal”), we believe it is necessary to point out certain deficiencies that hamper the ability of stakeholders to fully comprehend the Re-proposal and provide fully informed comments on it to the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (collectively, the “Federal Banking Agencies”) . Conspicuously absent from the Re-proposal is an analysis by the Federal Banking Agencies of the burdens and costs of the proposed regulation, which is required by statute.1 Accordingly, the CCMC respectfully requests that the Federal Banking Agencies fulfill their respective legal obligations and publish such analysis when the Re-proposal is published in the Federal Register. This will allow stakeholders and the general public to have a full and fair opportunity to review the Re-proposal and to submit thoughtful, thorough comments to the Federal Banking Agencies and all of the agencies involved in this rulemaking.

Discussion Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) requires the Federal Banking Agencies, the Securities and Exchange Commission (“SEC”), the National Credit Union Administration, and the Federal Housing Finance Authority to “jointly prescribe” regulations on incentive based compensation arrangements for financial services firms. A proposal issued in 2011 was never finalized. These six agencies recently re-proposed a rule to implement Section 956 of the Dodd-Frank Act.

An economic analysis of the costs and benefits of a proposed regulation on those affected by it is a critical tool in a regulator’s tool box.2 Cost-benefit analysis provides discipline to rulemaking so that rules are narrowly tailored to the problem they are designed to address. It also encourages the consideration of less costly alternative approaches. Financial regulators should welcome the public’s cooperation in such analysis to guarantee they consider a diversity of data and viewpoints germane to a specific rulemaking before it is finalized and implemented across a market.

Read the full letter here