Fed’s Dudley Proposes Paying Bankers in Debt to Mitigate Risks

Federal Reserve Bank of New York President William C. Dudley suggested making long-term debt part of senior bankers’ pay to avert excessive risk-taking.

“Structuring a long-term debt requirement so that a meaningful component consists of deferred compensation held by senior management would presumably strengthen the incentives for proactive risk management,” Dudley said today in the text of remarks given in Auckland, New Zealand. “More research is needed into how the structure of management compensation for financial firms could incentivize good risk management and limit the appetite for excessive risk.”