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European banks’ executive remuneration under the new European Union regulation

Author

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  • Pablo de Andrés
  • Rodrigo Reig
  • Eleuterio Vallelado

Abstract

We review how the new European regulation of bank executive compensation could affect the future of banking in Europe. Although there is no conclusive empirical evidence on the relation between bank executive remuneration and the financial crisis, authorities have intensively regulated the compensation of bank managers to eliminate risk-taking incentives in the financial industry. However, the new regulation could have unintended consequences of creating an adverse selection problem at European banks, reducing the number of best-performing managers available for European banks, and motivating an excessive increase in fixed remuneration over total remuneration, altering the way incentive systems work.

Suggested Citation

  • Pablo de Andrés & Rodrigo Reig & Eleuterio Vallelado, 2019. "European banks’ executive remuneration under the new European Union regulation," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 22(3), pages 208-225, July.
  • Handle: RePEc:taf:jecprf:v:22:y:2019:i:3:p:208-225
    DOI: 10.1080/17487870.2018.1424630
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    Cited by:

    1. Luis Porcuna Enguix, 2021. "The New EU Remuneration Policy as Good but Not Desired Corporate Governance Mechanism and the Role of CSR Disclosing," Sustainability, MDPI, vol. 13(10), pages 1-35, May.
    2. Catarina Proença & Mário Augusto & José Murteira, 2023. "Political connections and remuneration of bank boards’ members: moderating effect of gender diversity," Review of Managerial Science, Springer, vol. 17(8), pages 2727-2767, November.

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