Wall Street Faces New Restrictions on Executive Pay

Wall Street bankers and traders are scrutinizing a new regulatory proposal that could restrict their pay for longer periods of time and require them to give back bonus money if deals, loans or trades they work on go bust.

After regulators released the proposal on Thursday, the industry was quickly abuzz trying to figure out whose pay might be affected, employees and recruiters said.

"Everybody's talking about it and trying to figure out what all this entails," said Michael Karp, CEO of recruiting firm Options Group.

Big U.S. financial firms have been criticized since the 2007-2009 financial crisis, when they were slammed for allowing top executives and money-losing traders to leave with golden parachutes.

The toughest restrictions proposed this week would apply to high-ranking executives and top earners at the biggest financial institutions, ranging from JPMorgan Chase & Co to Fannie Mae and Freddie Mac. But they may also apply to lower-ranking traders, bankers and loan underwriters who qualify as "significant risk-takers." 

To fall into that category, an employee must be among the highest paid, have a bonus that is at least one-third of total pay, or have "authority" over at least 0.5 percent of a firm's capital.

However, a Wall Street bank executive who spoke on condition of anonymity said it only changes the degree to which pay is restricted, not the approach to paying employees altogether.