Regulators to Ask for Restrictions on Compensation, Risk

The Federal Reserve Board and other regulators will urge major banks to restructure their compensation packages to "discourage excessive risk taking," according to central banker Ben Bernanke. "We anticipate interagency guidance on this matter within the next few weeks," the Fed chief told a congressional panel Wednesday. He indicated that the guidance will include a "set of criteria and set of expectations" to ensure executives and traders are not compensated to take excessive risk without being penalized when those risks translate into losses for the banks. "We will be pushing the banks to move as quickly as possible" to implement new compensation policies, he said. The Fed has conducted a survey of bank compensation practices, discovering that many banks continue to use the same pay practices that were in place before the 2008 financial crisis. "We found many banks have not modified their practices," Bernanke testified in response to a question from Rep. Lloyd Doggett, D-Texas.