WASHINGTON (Reuters) - More regulation may be needed for a key part of the banking industry's profit engine, a top Federal Reserve official said on Tuesday, as regulators continue to determine ways to make markets safer and more transparent.

Fed Governor Jerome Powell said efforts to improve safeguarding against improper uses of information across the fixed income, currency and commodities markets could be done through private measures. But he added that while talks within the industry have been constructive, "it may also be that further supervisory or regulatory action is needed."

Speaking at a Brookings Institute event in Washington, Powell said the U.S. central bank has convened a group of the largest global dealers to form the Alternative Reference Rates Committee to study an alternative to Libor - the London interbank rate.

Powell added that banks' efforts to improve how they pay employees has improved, but more is also needed in that area. He said U.S. financial regulators, including the Fed, are preparing for public comment on a proposed new rule on incentive compensation.

(Reporting by Michael Flaherty; Editing by Paul Simao)