(Reuters) - Incentive programs at banks should reward not just bankers who increase revenues, but those who avoid losses and identify risks that could later hurt the institution, a top U.S. Federal Reserve official said on Monday.
Federal Reserve Governor Daniel Tarullo said that progress has been made regarding proper bank compensation since the 2007-2009 financial crisis, though more needs to be done.
“It is important that compensation arrangements, including clawback and forfeiture provisions, cover risks associated with market conduct and consumer protection, as well as credit and market risks,” Tarullo said in prepared remarks at a New York Fed conference on Monday.
Tarullo, the Fed’s top official on bank supervision and regulation, noted that while U.S. bank regulators do not have the power to criminally prosecute, they have the ability to remove bank employees from their companies, positions and even the industry.
Reporting by Michael Flaherty; Editing by Paul Simao