Moody's Slams Insane Bank Bonuses


“While many banks have made changes in line with new global compensation standards and more are expected,

in the long term we expect to see erosion in pay discipline,” Christian Plath, the author of the Moody's report, said in a statement.

If the industry returns to its freewheeling ways, Moody’s warned that it might consider downgrading bank credit ratings.

Wall Street firms and their European rivals have recently tweaked compensation practices to appease shareholders and regulators.

Banks are paying employees less cash — and more stock — to discourage reckless risk-taking.

Once public pressure wanes, however, the new limits “are likely to erode,” the Moody’s report said.

Lawmakers and regulators hope to head off that problem.

The Dodd-Frank so-called financial regulatory law mandates a crackdown on Wall S

treet pay.

The Securities and Exchange Commission introduced a Dodd-Frank proposal last month

that would require Wall Street firms to file detailed accounts of their bonus payments.

The S.E.C. could then ban any awards it deemed excessive.

But we're highly dubious, to say the least.

The S.E.C. in January enacted ‘’say on pay” rules that give shareholders a nonbinding vote on corporate salaries and bonuses.

European regulators have taken an even tougher stance.

The European Union, starting in January, set caps on cash bonuses

and required banks to defer other incentive payments for up to five years.

Banks, aiming to build good will with regulators, have already moved to rein in certain pay practices.

Some are guaranteeing fewer bonuses or are deferring the payouts, Moody’s said.

Others have enacted tougher corporate governance standards.

Wall Street doled out an estimated $20.8 billion in cash last year, an 8 percent decline from 2009,

according to a recent report by the New York State comptroller’s office.

The banks are instead awarding more stock and other deferred compensation.

Still, bankers are not exactly strapped for cash.

Wall Street’s overall paychecks rose 6 percent in 2010, the comptroller’s report said.

At Goldman Sachs last year, the base salary for managing directors rose to $500,000 from $300,000.

And Moody’s expects pay packages to keep getting bigger as the crisis fades

The rating agency said it was “less optimistic about lasting change”, according to the New York Times.