Fed Reports Modest Progress in Bank Compensation Plans

By ERIC DASH
NYT

Amid the uproar over bailouts and bonuses in the fall of 2009, the chief executives of the nation’s largest banks walked through the iron gates of the Federal Reserve Bank of New York and received a stern warning that their pay practices needed to be overhauled.

Two years later, there has been only modest change, according to the findings of a long-awaited Federal Reserve report on bank compensation practices.

In the 27-page report released on Tuesday, Federal Reserve officials heralded a series of incremental improvements that showed big banks were delaying the payouts of a greater portion of their compensation, with senior executives now deferring more than 60 percent of their bonuses.

But most of the 25 large banks in the Fed’s review still do not adjust bonuses to fully reflect the riskiness of the bets made by bankers and traders. Some of the potential conflicts of interest that regulators initially flagged — like having risk managers report to executives who have influence over their year-end bonuses — still remain.

(More here.)