House committee approves new powers to let regulators ban incentive pay

New powers to be awarded to regulators to ban short-term incentive pay and give shareholders a vote on staff bonuses

WASHINGTON, DC - The US House Financial Services Committee has approved legislation that would allow regulators to ban incentive pay at banks as well as give shareholders a vote on bonuses - although the latter would be non-binding.

The bill would allow the US Securities & Exchange Commission and other bank regulators to bar compensation practices that would push financial companies to take "inappropriate risks".

The bill still needs to be passed by Congress before it can be signed into law. "There is a risk to the system when the incentive structure is huge," said Barney Frank, chairman of the US House Financial Services Committee.
Such legislation goes much further than the reforms touted in the Obama administration plan for financial regulatory reform, and is in response to the huge public outcry over bonuses being paid to banks bailed out by the state during the crisis.