Tags: fed | banker | salaries

Fed Plans to Approve Banking Salaries: Report

Friday, 18 Sep 2009 06:45 AM

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The Federal Reserve would be required to approve salaries for tens of thousands of US bank workers, as part of a plan to curb risk-taking at financial institutions, The Wall Street Journal reported Friday.

"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 report said.

The proposal would see the Fed empowered to ban any compensation policies it believes encourage bank employees -- from chief executives, to traders, to loan officers -- to take too much risk.

"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 requires a vote by the Fed board, but not 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 report 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 totaled 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.

France and Germany, Europe's leading economies, are lobbying for strict limits on executive's compensation.

--AFP

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