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

collapse.

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)