Tags: Fed | financial | executive | bonuses

WSJ: Fed Convinces Financial Firms to Cut Back on Executive Bonuses

By    |   Tuesday, 23 April 2013 11:12 AM

The Federal Reserve is apparently having some success in its campaign to curb compensation for executives of financial services firms.

The Fed’s aim is to prevent banks and other companies from taking excessive risks in order to boost executive pay.

Seven major firms, including PNC Financial Services Group, Capital One Financial and Discover Financial Services, are lowering bonus maximums for executives who top their performance targets, according to regulatory filings, The Wall Street Journal reported.

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The Fed got in touch with banks about their compensation plans starting late last year, a knowledgeable source told The Journal. In the regulatory filings, many of the firms said the Fed played a role in their decisions.

The central bank is obviously still concerned about risk in the financial system. “The Fed wants to ensure that excessive risk taking is not encouraged in these structures,” Mark Williams, a former Federal Reserve bank examiner who now teaches at Boston University, told The Journal.

Wall Street compensation has shrunk since the 2008-09 financial crisis, as bonuses have been cut and bank stock prices remain far below their pre-financial crisis levels.

But don’t shed too many tears for those on Wall Street.

While compensation may have dropped from the glory days, the average cash bonus for those employed in the financial industry in New York last year jumped 9 percent last year to $121,900, New York State Comptroller Thomas DiNapoli reported in February.

“Wall Street is still in transition, but it is very slowly adjusting to changes in its economic and regulatory environment,” he told The New York Times.

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The Federal Reserve is apparently having some success in its campaign to curb compensation for executives of financial services firms.
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2013-12-23
Tuesday, 23 April 2013 11:12 AM
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