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How post-crisis regulation has affected bank CEO compensation

Author

Listed:
  • Vittoria, Cerasi
  • Sebastian, Deininger
  • Leonardo, Gambacorta
  • Tommaso, Oliviero

Abstract

This paper assesses whether compensation practices for bank Chief Executive Officers(CEOs) changed after the Financial Stability Board (FSB) issued post-crisis guidelines on sound compensation. Banks in jurisdictions which implemented the FSB’s Principles and Standards of Sound Compensation in national legislation changed their compensation policies more than other banks. Compensation in those jurisdictions is less linked to short-term profits and more linked to risks, with CEOs at riskier banks receiving less, by way of variable compensation, than those at less-risky peers. This was particularly true of investment banks and of banks which previously had weaker risk management, for example those that previously lacked a Chief Risk Officer.

Suggested Citation

  • Vittoria, Cerasi & Sebastian, Deininger & Leonardo, Gambacorta & Tommaso, Oliviero, 2017. "How post-crisis regulation has affected bank CEO compensation," Working Papers 365, University of Milano-Bicocca, Department of Economics, revised 28 Apr 2017.
  • Handle: RePEc:mib:wpaper:365
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Banks; Managerial compensation; Prudential regulation; Risk-taking;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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