appointed conservator or receiver, the Federal Deposit Insurance Corporation;".

SEC. 2523. REGULATION OF GOLDEN PARACHUTES AND OTHER BENEFITS WHICH ARE SUBJECT TO MISUSE.

(a) FDIC INSURED DEPOSITORY INSTITUTIONS.-Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by inserting after subsection (j) the following new subsection:

"(k) AUTHORITY TO REGULATE OR PROHIBIT CERTAIN FORMS OF BENEFITS TO INSTITUTION-AFFILIATED PARTIES.

"(1) GOLDEN PARACHUTES AND INDEMNIFICATION PAYMENTS.— The Corporation may prohibit or limit, by regulation or order, any golden parachute payment or indemnification payment. "(2) FACTORS TO BE TAKEN INTO ACCOUNT.-The Corporation shall prescribe, by regulation, the factors to be considered by the Corporation in taking any action pursuant to paragraph (1) which may include such factors as the following:

"(A) Whether there is a reasonable basis to believe that the institution-affiliated party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the depository institution or depository institution holding company that has had a material affect on the financial condition of the institution. "(B) Whether there is a reasonable basis to believe that the institution-affiliated party is substantially responsible for the insolvency of the depository institution or depository institution holding company, the appointment of a conservator or receiver for the depository institution, or the depository institution's troubled condition (as defined in the regulations prescribed pursuant to section 32(f)).

"(C) Whether there is a reasonable basis to believe that the institution-affiliated party has materially violated any applicable Federal or State banking law or regulation that has had a material affect on the financial condition of the institution.

"(D) Whether there is a reasonable basis to believe that the institution-affiliated party has violated or conspired to violate

"(i) section 215, 656, 657, 1005, 1006, 1007, 1014, 1032, or 1344 of title 18, United States Code; or

"(ii) section 1341 or 1343 of such title affecting a federally insured financial institution.

"(E) Whether the institution-affiliated party was in a position of managerial or fiduciary responsibility.

"(F) The length of time the party was affiliated with the insured depository institution or depository institution holding company and the degree to which

"(i) the payment reasonably reflects compensation earned over the period of employment; and

“(ii) the compensation involved represents a reasonable payment for services rendered.

"(3) CERTAIN PAYMENTS PROHIBITED.-No insured depository institution or depository institution holding company may prepay the salary or any liability or legal expense of any institution-affiliated party if such payment is made

"(A) in contemplation of the insolvency of such institution or holding company or after the commission of an act of insolvency; and

"(B) with a view to, or has the result of

"(i) preventing the proper application of the assets of the institution to creditors; or

"(ii) preferring one creditor over another.

"(4) GOLDEN PARACHUTE PAYMENT DEFINED.-For purposes of this subsection

"(A) IN GENERAL.-The term 'golden parachute payment' means any payment (or any agreement to make any payment) in the nature of compensation by any insured depository institution or depository institution holding company for the benefit of any institution-affiliated party pursuant to an obligation of such institution or holding company that

"(i) is contingent on the termination of such party's affiliation with the institution or holding company; and "(ii) is received on or after the date on which

"(I) the insured depository institution or depository institution holding company, or any insured depository institution subsidiary of such holding company, is insolvent;

"(II) any conservator or receiver is appointed for such institution; or

"(III) the institution's appropriate Federal banking agency determines that the insured depository institution is in a troubled condition (as defined in the regulations prescribed pursuant to section 32(f));

"(IV) the insured depository institution has been assigned a composite rating by the appropriate Federal banking agency or the Corporation of 4 or 5 under the Uniform Financial Institutions Rating System; or

"(V) the insured depository institution is subject to a proceeding initiated by the Corporation to terminate or suspend deposit insurance for such institution.

"(B) CERTAIN PAYMENTS IN CONTEMPLATION OF AN EVENT.-Any payment which would be a golden parachute payment but for the fact that such payment was made before the date referred to in subparagraph (A)(ii) shall be treated as a golden parachute payment if the payment was made in contemplation of the occurrence of an event described in any subclause of such subparagraph.

"(C) CERTAIN PAYMENTS NOT INCLUDED.-The term 'golden parachute payment' shall not include

"(i) any payment made pursuant to a retirement plan which is qualified (or is intended to be qualified) under section 401 of the Internal Revenue Code of 1986 or other nondiscriminatory benefit plan;

"(ii) any payment made pursuant to a bona fide deferred compensation plan or arrangement which the Board determines, by regulation or order, to be permissible; or

"(iii) any payment made by reason of the death or disability of an institution-affiliated party.

“(5) OTHER DEFINITIONS.-For purposes of this subsection"(A) INDEMNIFICATION PAYMENT.-Subject to paragraph (6), the term 'indemnification payment' means any payment (or any agreement to make any payment) by any insured depository institution or depository institution holding company for the benefit of any person who is or was an institution-affiliated party, to pay or reimburse such person for any liability or legal expense with regard to any administrative proceeding or civil action instituted by the appropriate Federal banking agency which results in a final order under which such person

"(i) is assessed a civil money penalty;

"(ii) is removed or prohibited from participating in conduct of the affairs of the insured depository institution; or

"(iii) is required to take any affirmative action described in section 8(b)(6) with respect to such institution.

“(B) LIABILITY OR LEGAL EXPENSE.-The term 'liability or legal expense' means

"(i) any legal or other professional expense incurred in connection with any claim, proceeding, or action; “(ii) the amount of, and any cost incurred in connection with, any settlement of any claim, proceeding, or action; and

“(iii) the amount of, and any cost incurred in connection with, any judgment or penalty imposed with respect to any claim, proceeding, or action.

"(C) PAYMENT.-The term 'payment' includes

"(i) any direct or indirect transfer of any funds or any asset; and

"(ii) any segregation of any funds or assets for the purpose of making, or pursuant to an agreement to make, any payment after the date on which such funds or assets are segregated, without regard to whether the obligation to make such payment is contingent on

"(I) the determination, after such date, of the liability for the payment of such amount; or

"(II) the liquidation, after such date, of the amount of such payment.

"(6) CERTAIN COMMERCIAL INSURANCE COVERAGE NOT TREATED AS COVERED BENEFIT PAYMENT.—No provision of this subsection shall be construed as prohibiting any insured depository institution or depository institution holding company from purchasing any commercial insurance policy or fidelity bond, except that, subject to any requirement described in paragraph (5)(A)(iii), such insurance policy or bond shall not cover any legal or liability expense of the institution or holding company which is described in paragraph (5)(A).".

(b) NCUA INSURED CREDIT UNIONS DEPOSITORY INSTITUTIONS.— Section 206 of the Federal Credit Union Act (12 U.S.C. 1786) is amended by adding at the end the following new subsection:

"(t) REGULATION OF CERTAIN FORMS OF BENEFITS TO INSTITUTIONAFFILIATED PARTIES.—

"(1) GOLDEN PARACHUTES AND INDEMNIFICATION PAYMENTS.— The Board may prohibit or limit, by regulation or order, any golden parachute payment or indemnification payment.

"(2) FACTORS TO BE TAKEN INTO ACCOUNT.-The Board shall Regulations. prescribe, by regulation, the factors to be considered by the Board in taking any action pursuant to paragraph (1) which may include such factors as the following:

"(A) Whether there is a reasonable basis to believe that the institution-affiliated party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the credit union that has had a material affect on the financial condition of the credit union.

"(B) Whether there is a reasonable basis to believe that the institution-affiliated party is substantially responsible for the insolvency of the credit union, the appointment of a conservator or liquidating agent for the credit union, or the credit union's troubled condition (as defined in prescribed by the Board pursuant to paragraph (4)(A)(ii)(III)).

"(C) Whether there is a reasonable basis to believe that the institution-affiliated party has materially violated any applicable Federal or State banking law or regulation that has had a material affect on the financial condition of the credit union.

"(D) Whether there is a reasonable basis to believe that the institution-affiliated party has violated or conspired to violate

"(i) section 215, 656, 657, 1005, 1006, 1007, 1014, 1032, or 1344 of title 18, United States Code; or

"(ii) section 1341 or 1343 of such title affecting a financial institution.

"(E) Whether the institution-affiliated party was in a position of managerial or fiduciary responsibility.

"(F) The length of time the party was affiliated with the credit union and the degree to which

"(i) the payment reasonably reflects compensation earned over the period of employment; and

"(ii) the compensation involved represents a reasonable payment for services rendered.

"(3) CERTAIN PAYMENTS PROHIBITED.-No credit union may prepay the salary or any liability or legal expense of any institution-affiliated party if such payment is made

"(A) in contemplation of the insolvency of such credit union or after the commission of an act of insolvency; and "(B) with a view to, or has the result of

"(i) preventing the proper application of the assets of the credit union; or

"(ii) preferring one creditor over another.

"(4) GOLDEN PARACHUTE PAYMENT DEFINED.-For purposes of this subsection

"(A) IN GENERAL.-The term 'golden parachute payment' means any payment (or any agreement to make any payment) in the nature of compensation by any credit union for the benefit of any institution-affiliated party pursuant to an obligation of such credit union that

"(i) is contingent on the termination of such party's affiliation with the credit union; and

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"(ii) is received on or after the date on which"(I) the credit union is insolvent;

"(II) any conservator or liquidating agent is appointed for such credit union; or

"(III) the Board determines that the credit union is in a troubled condition (as defined in regulations which the Board shall prescribe);

"(IV) the credit union has been assigned a composite rating by the Board of 4 or 5 under the Uniform Financial Institutions Rating System (as applicable with respect to credit unions); or

"(V) the credit union is subject to a proceeding initiated by the Board to terminate or suspend deposit insurance for such credit union.

"(B) CERTAIN PAYMENTS IN CONTEMPLATION OF AN EVENT.-Any payment which would be a golden parachute payment but for the fact that such payment was made before the date referred to in subparagraph (A)(ii) shall be treated as a golden parachute payment if the payment was made in contemplation of the occurrence of an event described in any subclause of such subparagraph.

"(C) CERTAIN PAYMENTS NOT INCLUDED.-The term 'golden parachute payment' shall not include

"(i) any payment made pursuant to a retirement plan which is qualified (or is intended to be qualified) under section 401 of the Internal Revenue Code of 1986 or other nondiscriminatory retirement or severance benefit plan;

(ii) any payment made pursuant to a bona fide deferred compensation plan or arrangement which the Board determines, by regulation or order, to be permissible; or

"(iii) any payment made by reason of the death or disability of an institution-affiliated party.

"(5) OTHER DEFINITIONS.-For purposes of this subsection"(A) INDEMNIFICATION PAYMENT.-Subject to paragraph (6), the term 'indemnification payment' means any payment (or any agreement to make any payment) by any credit union for the benefit of any person who is or was an institution-affiliated party, to pay or reimburse such person for any liability or legal expense with regard to any administrative proceeding or civil action instituted by the Board which results in a final order under which such person

"(i) is assessed a civil money penalty;

"(ii) is removed or prohibited from participating in conduct of the affairs of the credit union; or

"(iii) is required to take any affirmative action described in section 206(e)(3) with respect to such credit union.

“(B) LIABILITY OR LEGAL EXPENSE.-The term 'liability or legal expense' means

"(i) any legal or other professional expense incurred in connection with any claim, proceeding, or action; "(ii) the amount of, and any cost incurred in connection with, any settlement of any claim, proceeding, or action; and