12 U.S.C. § 1831p–1 — Standards for safety and soundness

(a) Operational and managerial standards
For all insured depository institutions, each appropriate Federal banking agency^* must prescribe standards for (1)(A) internal controls, information systems, and internal audits consistent with section 1831m, (B) loan documentation, (C) credit^* underwriting, (D) interest-rate exposure, (E) asset growth, (F) compensation, fees, and benefits consistent with subsection (c), and (2) any other operational or managerial matters the agency finds appropriate.

(b) Asset quality, earnings, and stock valuation standards
By regulation or guideline, each agency must prescribe for all insured depository institutions the standards for asset quality, earnings, and stock valuation that it finds appropriate.

(c) Compensation standards
Each agency must prescribe (1) standards treating as an unsafe and unsound practice any employment contract, compensation or benefit agreement, fee arrangement, perquisite, stock-option plan, post-employment benefit, or other compensation arrangement that (A) gives an executive officer, employee, director^*, or principal shareholder excessive compensation, fees, or benefits, or (B) could cause the institution a material financial loss; (2) standards for deciding when such amounts are excessive. The agency must decide whether amounts are unreasonable or disproportionate to the services performed, considering (A) all cash and noncash benefits, (B) the person's compensation history and that of similarly skilled people at the institution, (C) the institution's financial condition, (D) comparable practices at comparable institutions based on asset size, location, and loan-portfolio or other-asset complexity, (E) projected total cost and benefit of post-employment benefits, (F) any connection between the person^* and fraud, breach of trust or fiduciary duty, or insider abuse involving the institution, and (G) other relevant factors. (3) The agency may prescribe other appropriate compensation, fee, and benefit standards.

(d) Standards to be prescribed
(1) Standards under (a), (b), and (c) must be issued by regulation or guideline. Those regulations and guidelines may not set a specific compensation amount or range for directors, officers, or employees. (2) This does not limit authority under another law to restrict compensation, including “golden parachute payments” (defined in section 1828(k)(4)). (3) It does not limit authority to restrict a senior executive officer's compensation under section 1831o for an undercapitalized institution. (4) It does not limit authority under another chapter provision or law to set a specific amount or range to preserve safety and soundness or in connection with section 1818 action, an agency order, an agency-institution agreement, or an enforceable condition of agency approval.

(e) Failure to meet standards
(1)(A) If an agency finds that an institution fails to meet a subsection (a) or (b) standard, it must require a plan when the standard is in a regulation, and may require one when it is in a guideline. (B) The plan must state^* the steps to correct the deficiency; for an undercapitalized institution it may be part of a capital restoration plan. (C) Rules must give reasonable time, generally requiring submission within 30 days after the finding, and generally requiring agency action within 30 days after submission.
(2) If the institution does not timely submit an acceptable plan or materially fails to carry out an accepted plan, the agency must order it to correct the deficiency and may, until correction, (A) bar average total assets from exceeding the prior quarter's average or limit their growth, (B) require a higher tangible-equity-to-assets ratio, (C) take the action described in section 1831o(f)(2)(C), or (D) require another action that better serves section 1831o's purpose than those actions.
(3) The agency must take one or more actions in paragraph (2)(B)(i)-(iii) if it finds failure to meet a subsection (a)(1) or (b)(1) standard, the deficiency remains, and either (A) in the prior 24 months the institution began operations or someone acquired control, or (B) in the prior 18 months it experienced extraordinary growth, as the agency defines it.

(f) Definitions
“Average” and “capital restoration plan” have the meanings in section 1831o. This section does not define those quoted terms.

(g) Other authority not affected
The Federal banking agencies' authority under this section is in addition to all their other authority.