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April 23, 2013

Regulators Get Banks to Rein In Bonus Pay

U.S. banks are bowing to regulators’ concerns about the size of executive pay and its role in financial industry risk-taking.

Seven large U.S. financial-services firms, including PNC Financial Services GroupCapital One Financial Corp., and Discover Financial Services Inc., said they are scaling back the maximum bonuses awarded to executives who beat their performance targets, according to regulatory filings.

Late last year, the Federal Reserve began contacting banks about their compensation plans, said a person familiar with the phone calls. In regulatory filings, many of the firms cited the Fed as a reason for changes.

Since the financial crisis the Fed has urged banks to cap bonuses in cases where they could encourage executives to take too much risk. Before the crisis, banks erred by focusing too much on short-term profits and too little on risk when designing bonus plans for employees and executives, according to the Fed.”

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Read full Wall Street Journal article here

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