U.S. regulators likely will force banks to defer some of their executives' compensation as part of a proposal to curb risky pay practices, Federal Deposit Insurance Corp. Chairman Sheila Bair said in an interview with CNBC Thursday.
The FDIC board will meet Jan. 18 to consider the proposal. The Dodd-Frank financial reform law requires regulators to make a rule that bans incentive-based pay practices that encourage "inappropriate risks" by employees at banks and other financial companies.
"I think you will see required deferrals for executive management," she said.
The provision was added to the law in response to complaints that financial institutions were paying executives based on short-term profit gains and without thinking about the long-term implications for the companies and markets.
Bair also said that she expects the Federal Reserve to take a "very measured and prudent" approach in determining which large banks can raise their dividend payments.
"There are still some uncertainties out there with the housing market, with servicing," she said. "I think we need to get clarity on the range of losses out there."
Republicans, who control the House of Representatives, have criticized the Dodd-Frank financial overhaul, but Bair said it's unlikely any major changes will be made to the law in the near future, and lawmakers should focus on oversight.
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