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FDIC Wants to Shift Burden to Banks Taking Risks: Bair

The FDIC's proposal to raise insurance fees for banks that encourage risk-taking is aimed at shifting the burden to those particular banks and not at raising revenue, FDIC Chairman Sheila Bair told CNBC Tuesday.

Sheila Bair
CNBC.com
Sheila Bair

"Clearly there is ample evidence that compensation structures that are frontloaded, fee-based upfront that do not take into account the longer tail of risk...those types of frontloaded compensation structures have created risk," Bair said in an interview.

The FDIC voted 3-2 earlier on Tuesday to examine raising insurance premiums on banks whose compensation packages encourage executives and traders to engage in risky behavior.

The fee would focus on compensation structures, and not on the heavily-debated pay levels for which banks have come under fire since the onslaught of the financial crisis, Bair said.

"That clearly is something that boards and the shareholders that they represent should be dealing with, [and] not regulators," she said.

She said structuring the fee in this way would help institutions that want to include "clawback" provisions into their policies, but have been fearful to do so at risk of losing a competitive edge against other banks.

Bair said she understands that bank pay is a controversial topic, so the FDIC plans to go slowly and work transparently on the issue.

In comments earlier to reporters, Bair said she has not been consulted about an Obama administration idea to charge banks a fee to recoup some government bailout costs.

Bair said the FDIC and other regulators would not be involved with any such plan because it involves the administration's tax policy.

However, she said that generally the FDIC supports pre-funding a "resolution fund" in the future that would be used to cover the costs of dismantling any insolvent, major financial firms.

"We don't want any bailouts, we want resolutions," Bair told reporters.

Many on Wall Street are upset about the emphasis that has been placed on their compensation practices, with JPMorgan CEO Jamie Dimon saying Monday he is "tired" of the flack his employees have received over bonuses.

Reuters contributed to this report