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HORSHAM, England, Dec 8 (Reuters) - Billionaire investor George Soros said regulators should have a say on bankers' pay as part of the "implicit guarantee" that lenders get from the taxpayer.
There is an implied support that taxpayers will step in to save major banks in trouble, and it is the duty of regulators to ensure that guarantee is not invoked, Soros said on Tuesday.
"That is what gives them (regulators) the right and the duty to regulate those institutions, and that includes regulation of salaries. You have to make sure rewards are commensurate of the risk," Soros, chairman of Soros fund Management, said at a banking conference in southern England.
Lawmakers and regulators in the United States, Britain and elsewhere are assessing how far they should get involved in banks' remuneration policies amid the prospect of big payouts for 2009 less than a year after billions of dollars of taxpayer cash was pumped into the industry.
Soros said proprietary trading by investment banks should also shift toward hedge funds, which is "where it belongs", as they are systemically not too big to fail.
"That would be a helpful thing because investment banks are speculating with depositors' money and hedge funds are speculating with money that is well advised in advance," he said.
The investor said there should also be greater oversight of the credit default swaps (CDS) market.
"They (CDS) developed while I wasn't looking... they really are a toxic instrument," Soros said.
"They are supposed to be insurance, but effectively it's like selling insurance to someone other than the person you are insuring and giving them a license to shoot that person." (Reporting by Steve Slater; Editing by Sharon Lindores)