Ieva Sakalauskaite and Qun Harris
Following the Global Financial Crisis of 2007–08, some regulators introduced rules on bankers’ bonuses with an aim to mitigate incentives to take excessive risks, and in turn promote financial stability. In a recent paper we use detailed data on remuneration of staff in six large UK banks to look at how two of those rules – the bonus cap and deferral – affected bankers’ pay. We find that the bonus cap did not reduce bankers’ total remuneration but rather shifted it from the variable to the fixed part of the package. And while requirements to defer bonus pay can be expected to affect bankers’ risk-taking incentives, we find some evidence that they increased their total compensation.
