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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations interim final rule if it maintains compliance with the guidelines or standards established by its primary Federal regulator that address excessive compensation, corporate practices, and operations. Specifically, ECIP recipients that are insured depository institutions are subject to the Interagency Guidelines Establishing Standards for Safety and Soundness as issued by the appropriate Federal banking agency for the particular ECIP recipient.10 Bank holding companies and savings and loan holding companies are required to maintain compliance with corporate practice 11 and operations requirements 12 issued by the Board of Governors of the Federal Reserve System Federal Reserve Board, and, under the interim final rule, to ensure their subsidiary insured depository institutions adopt and maintain policies and procedures that are consistent with the applicable guidelines or standards established by their primary Federal regulators that address excessive compensation. In addition, federally insured credit unions must maintain compliance with the requirements on compensation and benefits for federally insured credit unions as issued by the National Credit Union Administration NCUA.13 Treasury reserves the authority to take action as necessary to address potential anti-evasion concerns relating to the interim final rules requirements for ECIP participants.

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ii. Limit on Severance Pay Under the interim final rule, an ECIP
recipient is prohibited from making excessive severance payments to a senior executive officer. Severance pay is defined to include all types of cash payments, benefits, and other amounts paid or provided in connection with an individuals termination of employment, except for payment for services performed or benefits that were accrued prior to termination of employment or otherwise accrued with respect to services performed.
Unless informed otherwise by Treasury, an ECIP recipient that is an insured depository institution, bank holding company, or savings and loan holding company is considered to have satisfied the requirements regarding severance payments if it maintains compliance with the limits and 10 For national banks and Federal savings associations, 12 CFR part 30, Appendix A; state member banks, 12 CFR part 208, Appendix D1;
and insured state nonmember banks and state savings associations, 12 CFR part 364, Appendix A.
11 12 CFR 225.4.
12 12 CFR 238.8.
13 12 CFR 701.19a; 12 CFR 701.21c8; 12 CFR
702.203b10; 12 CFR 702.204b10.

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prohibitions on the ability of insured depository institutions and their affiliated holding companies to enter into contracts to pay and to make golden parachute and indemnification payments to institution-affiliated parties, as issued by the FDIC.14 The FDIC rules place restrictions on payments to institution-affiliated parties whenever an insured depository institution or depository institution holding company is in troubled condition, as determined by the appropriate Federal banking agency. An ECIP recipient that is not designated in troubled condition by the appropriate Federal banking agency during the ECIP
period generally would not be subject to restrictions on severance payments under the interim final rule. Similarly, a federally insured credit union is considered to have satisfied the requirements regarding severance payments if it maintains compliance with the limits and prohibitions on the ability of federally insured credit unions to enter into contracts to pay and to make golden parachute and indemnification payments to institution-affiliated parties as issued by the NCUA.15 This restriction is designed to align the requirements of the ECIP
with existing standards applicable to ECIP recipients under regulations issued by Federal regulators.
iii. Limit on Excessive or Luxury Expenditures Under the interim final rule, ECIP
recipients are required to establish and maintain policies designed to eliminate excessive or luxury expenditures. The term excessive or luxury expenditures is defined as excessive expenditures on any of the following to the extent such expenditures are not reasonable expenditures for staff development, reasonable performance incentives, or other similar reasonable measures conducted in the normal course of the ECIP recipients business operations: 1
Entertainment or events; 2 office and facility renovations; 3 aviation or other transportation services; 4 tax gross-ups i.e., reimbursement of taxes owed with respect to any compensation; and 5
other similar items, activities, or events for which the ECIP recipient may reasonably anticipate incurring expenses, or reimbursing an employee for incurring expenses. Capital investments, including investments in technology, equipment, and similar items that expand the long-term capability of an ECIP recipient to provide products and services to its 14 12
15 12

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CFR part 359.
CFR part 750.

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customers and community are not excessive or luxury expenditures.
The interim final rule requires an ECIP recipient to adopt and maintain an excessive or luxury expenditures policy that sets forth written standards applicable to the ECIP recipient and its employees that address the five categories of expenses set forth in the definition of excessive or luxury expenditures and that are reasonably designed to eliminate excessive or luxury expenditures. The standards must 1 identify the types or categories of expenditures which are prohibited;
2 identify the types or categories of expenditures for which prior approval is required which may include a threshold expenditure amount per item, activity, or event or a threshold expenditure amount per employee receiving the item or participating in the activity or event; 3 provide reasonable approval procedures for expenditures requiring prior approval; 4 require the ECIP recipient to deliver a certification, executed by two senior executive officers one of which must be either the ECIP recipients chief executive officer or individual performing a similar function defined as the principal executive officer or its chief financial officer or individual performing a similar function defined as the principal financial officer that the approval of any expenditure requiring the prior approval of any senior executive officer, any executive officer of a substantially similar level of responsibility, or the ECIP recipients board of directors or a committee of such board of directors was properly obtained with respect to each such expenditure; 5 require the prompt internal reporting of violations to an appropriate person or persons identified in this policy; and 6 mandate accountability for adherence to the policy. The requirement to establish a policy regarding excessive or luxury expenditures is intended to promote the integrity of ECIP by ensuring that the funds provided under the Program are used to provide loans, grants, and forbearance, without restricting ECIP
participants discretion to establish policies and procedures that are tailored to meet the needs and business objectives of their respective organizations.
To facilitate compliance with this requirement, Treasury is making available to ECIP recipients a form of excessive or luxury expenditures policy in Appendix A to the interim final rule.
An ECIP recipient may use this form to satisfy the requirement in the interim final rule to adopt and maintain an excessive or luxury expenditures policy.

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