Washington - Federal Reserve Chairman Ben Bernanke said Friday the US central bank is taking steps to improve regulation of banks that sparked the financial crisis, but it was critical for lawmakers to further close gaps in federal oversight. The Fed proposed new rules Thursday that would effectively give it veto power over the pay packages of top financial executives. Banks will be forced to comply with new guidelines that prevent executives from being awarded for the kind of risky behaviour that helped push Wall Street to the brink of collapse last year.
The central bank is planning a broad and regular "coordinated examination" of the compensation practices of the country's 28 largest banks to expose outliers. Smaller banks will also have their compensation practices reviewed.
Executive salaries have been a main focus of public anger as the financial crisis dragged down the entire global economy. A separate government order on Thursday slashed by more than 50 per cent the salaries of seven major companies that received government bail-outs.
Bernanke said the Fed could do a lot to strengthen its oversight, which has been blamed along with other regulators for failing to catch warning signs for Wall Street's crisis.
But he urged Congress to quickly adopt a rash of reform proposals that would boost the government's powers to step into failing firms and plug gaps in regulating markets like over-the-counter derivatives.
"Although regulators can do a great deal on their own to improve financial regulation and oversight, the Congress also must act," Bernanke told an economic conference in Boston.
The Financial Services Committee of the House of Representatives began considering the measures last week, but its counterpart in the Senate has yet to begin the debate.
US President Barack Obama is pushing for the reforms to be adopted by the end of this year, but the deadline could slip amid a bruising battle over health care.
