Fed to propose wide-ranging bank pay rules
Fri Sep 18, 2009 9:50am EDT
WASHINGTON (Reuters) - The U.S. 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 on Friday.
The source, speaking on condition of anonymity, said the guidelines would apply to all firms
regulated by the Fed and would be enforceable under its existing supervisory powers.
Massive losses inflicted by risky bets on U.S. subprime mortgage loans last year destroyed some
of the oldest names in U.S. banking and pushed the global financial system to the brink of
The rules would aim to curb excess 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, but the
timeline for the guidelines to advance was weeks, not months, the Fed source said.
(Reporting by Alister Bull; Editing by W Simon)