WASHINGTON — The Federal Reserve in the next few weeks will offer guidance on executive pay practices for the nation's biggest banks as concerns continue that incentives on Wall Street encourage excessive risk-taking, Fed Chairman Ben Bernanke said Wednesday.
Appearing on Capitol Hill, Bernanke said the central bank is pushing banks to restructure compensation packages so they don't encourage employees to take excessive risks. The Fed plans to issue a public report later this year or early next year, he said, but will not wait for that to act.
"We're going to respond," he said. "Many banks have not modified their practices."
The compensation practices at the nation's largest financial services firms have been cited as one of the key causes of the financial crisis. Critics have suggested that pay packages encouraging traders and other top executives to produce outsized profits with no penalty if their actions result in losses perverted risk appetites on Wall Street.