Tags: Fed | Dudley | Big | Banks | Break-Up

Fed's Dudley Warns Big Banks: Mend Your Ways or Face Break-Up

Monday, 20 Oct 2014 05:43 PM

Federal Reserve Bank of New York President William C. Dudley said the financial industry had lost public trust and warned banks that don’t improve on internal culture will be broken up.

If bad behavior persists, “the inevitable conclusion will be reached that your firms are too big and complex to manage effectively,” Dudley told industry leaders in a speech Monday at the New York Fed. “In that case, financial stability concerns would dictate that your firms need to be dramatically downsized and simplified so they can be managed effectively.”

Dudley’s comments, which follow a string of scandals including Libor and foreign exchange trading, were made at a closed-doors workshop attended by senior bankers at the New York Fed on reforming Wall Street culture and behavior.

The New York Fed chief suggested a number of ways in which the incentives of bank employees could be better aligned with the interests of the general public, including deferred compensation plans and a centralized, industry-wide registry for tracking individual offenses.

Fines levied against banks could be paid out of deferred debt compensation of senior managers, Dudley said.

“This would increase the financial incentive of those individuals who are best placed to identify bad activities at an early stage, or prevent them from occurring in the first place,” he said.

Dudley’s remarks followed a speech by Federal Reserve Governor Daniel Tarullo delivered earlier Monday at the same conference at which he said banks may face stiffer rules unless they improve their bad behavior.

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Federal Reserve Bank of New York President William C. Dudley said the financial industry had lost public trust and warned banks that don't improve on internal culture will be broken up.
Fed, Dudley, Big, Banks, Break-Up
248
2014-43-20
Monday, 20 Oct 2014 05:43 PM
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