U.S. regulators will be able to snatch back up to two years of Wall Street executives' pay if they are found responsible for the collapse of a major financial firm, under a rule approved on Wednesday.
The provision is part of a broader Federal Deposit Insurance Corp rule laying out the order in which creditors will be paid during a government liquidation of a large, failing financial firm.
The 2010 Dodd-Frank financial oversight law gives financial agencies this power to recoup executives' pay, but bankers are complaining regulators are taking it too far.
FDIC staff said on Wednesday that the new rule tries to clarify the standard that will be used to determine whether pay should be clawed back.
Acting Comptroller of the Currency John Walsh, who had raised concerns about the standard being too broad in the earlier version, said the changes satisfied his concerns.
The liquidation authority is intended to help prevent a repeat of massive government bailouts during the 2007-2009 financial crisis.
(Reporting by Dave Clarke, Editing by Tim Dobbyn)