<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published September 19, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Fed to clamp down on bankers' pay
It will propose wide-ranging rules aimed at curbing excessive short-term risk-taking, says source
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(Washington)
THE Federal Reserve is close to proposing wide-ranging rules on bankers' pay that would apply to any employee able to take risks that could threaten the safety and soundness of the institution, a Fed source said yesterday.
The source, speaking on condition of anonymity, said the guidelines would apply to all firms regulated by the central bank and would be enforceable under its existing supervisory powers.
Massive losses inflicted by risky bets on US subprime mortgage loans last year destroyed some of the oldest names in US banking and pushed the global financial system to the brink of collapse.
The rules would aim to curb excessive short-term risk-taking by any employee, not just bank executives, and would take a two-pronged approach.
Larger firms would be subject to a horizontal review process to compare their practices against rivals, while the compensation review for smaller banks would be part of their regular bank exams, the Fed source said.
The proposal has not yet been voted on by the Fed's Board of Governors in Washington, the Fed source said.
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</TD></TR></TBODY></TABLE>Earlier the Wall Street Journal reported the move.
'The Fed's plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks' corporate boards and executives,' the Journal said.
'Bureaucrats wouldn't set the pay of individuals, but would review and, if necessary, amend each bank's salary and bonus policies to make sure they don't create harmful incentives,' the report added.
A final proposal 'is still a few weeks from completion and could be revised along the way,' the report said, citing unnamed persons familiar with the matter. The move does not require a Congressional green light.
'The US' largest banks, about 25 in number, would get especially close scrutiny. The central bank intends to compare these banks as a group to see if any practices stand out as unusually dangerous to their firms,' the Journal added.
In the United States, Wall Street banks rescued in the 2008 financial crisis paid bonuses regardless of their performance, according to a report by New York Attorney-General Andrew Cuomo.
And the report found that some banks bailed out by the US government paid executives bonuses that totalled more than entire company profits last year.
Executive bonuses have generated public outrage and are a flashpoint issue for the G20 leaders to address at a summit in Pittsburgh next week.
On Thursday, European Union leaders agreed to seek curbs on bankers' bonuses at next week's G20 summit. France and Germany, Europe's leading economies, are leading the move for strict limits on executive's compensation. -- Reuters, AFP
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Fed to clamp down on bankers' pay
It will propose wide-ranging rules aimed at curbing excessive short-term risk-taking, says source
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right>
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</TD><TD>Print article </TD></TR><TR class=font10><TD width=20 align=right>
</TD><TD>Feedback</TD></TR></TBODY></TABLE>(Washington)
THE Federal Reserve is close to proposing wide-ranging rules on bankers' pay that would apply to any employee able to take risks that could threaten the safety and soundness of the institution, a Fed source said yesterday.
The source, speaking on condition of anonymity, said the guidelines would apply to all firms regulated by the central bank and would be enforceable under its existing supervisory powers.
Massive losses inflicted by risky bets on US subprime mortgage loans last year destroyed some of the oldest names in US banking and pushed the global financial system to the brink of collapse.
The rules would aim to curb excessive short-term risk-taking by any employee, not just bank executives, and would take a two-pronged approach.
Larger firms would be subject to a horizontal review process to compare their practices against rivals, while the compensation review for smaller banks would be part of their regular bank exams, the Fed source said.
The proposal has not yet been voted on by the Fed's Board of Governors in Washington, the Fed source said.
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'The Fed's plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks' corporate boards and executives,' the Journal said.
'Bureaucrats wouldn't set the pay of individuals, but would review and, if necessary, amend each bank's salary and bonus policies to make sure they don't create harmful incentives,' the report added.
A final proposal 'is still a few weeks from completion and could be revised along the way,' the report said, citing unnamed persons familiar with the matter. The move does not require a Congressional green light.
'The US' largest banks, about 25 in number, would get especially close scrutiny. The central bank intends to compare these banks as a group to see if any practices stand out as unusually dangerous to their firms,' the Journal added.
In the United States, Wall Street banks rescued in the 2008 financial crisis paid bonuses regardless of their performance, according to a report by New York Attorney-General Andrew Cuomo.
And the report found that some banks bailed out by the US government paid executives bonuses that totalled more than entire company profits last year.
Executive bonuses have generated public outrage and are a flashpoint issue for the G20 leaders to address at a summit in Pittsburgh next week.
On Thursday, European Union leaders agreed to seek curbs on bankers' bonuses at next week's G20 summit. France and Germany, Europe's leading economies, are leading the move for strict limits on executive's compensation. -- Reuters, AFP
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