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On Thursday, revised draft rules for financial institutions’ incentive-based compensation arrangements were released, more than five years after the rules were initially proposed.  The National Credit Union Administration was the first regulator to release rules (which are mandated under Section 956 of Dodd-Frank), and in the coming weeks, the federal banking regulators and the SEC are expected to issue substantially identical proposals.  If finalized, these regulations would prohibit banks, broker-dealers, investment advisers and other financial institutions with at least $1 billion in assets from having incentive-based compensation arrangements that encourage inappropriate risk (x) by providing “excessive compensation” to employees or (y) that could lead to “material financial loss” to the covered institution.  To effectuate this open-ended “inappropriate risk” standard, the rules would impose significant procedural checks on executive compensation programs at all covered institutions, as well as more meaningful substantive and structural limitations on institutions with at least $50 billion in assets, including minimum vesting periods and clawbacks for senior executive officers and significant risk-takers at these institutions.