Citation

Discussion Paper Details

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Title: How post-crisis regulation has affected bank CEO compensation

Author(s): Vittoria Cerasi, Sebastian Deininger, Leonardo Gambacorta and Tommaso Oliviero

Publication Date: April 2017

Keyword(s): Managerial compensation, Prudential regulation and risk-taking

Programme Area(s): Financial Economics

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.

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Bibliographic Reference

Cerasi, V, Deininger, S, Gambacorta, L and Oliviero, T. 2017. 'How post-crisis regulation has affected bank CEO compensation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12008