Bankers’ Remuneration Reforms and New Challenges (Bankers’ remuneration reforms)

Abstract

The desire to structure bankers’ remuneration in a way that it is risk sensitive and aligned with the long-term incentives of their institutions was at the centre of the post Global Financial Crisis (GFC) regulatory reforms. A decade later, it is unclear whether the reforms achieved what they were intended for and whether they have resulted in some unintended consequences. The issue of unintended consequences is particularly important given that the banking sector needs to embrace technological innovation (Fintech) and sustainable banking agenda.

We are still far from understanding the real costs and benefits of the remuneration reforms because it is difficult to isolate the impact of remuneration restrictions from the impact other regulations and policies had on restricting risk-taking, banking structures and bonus culture. However, even if it is questionable whether the remuneration reforms contributed positively towards improving the stability of the banking sector, they seem unsuitable for promoting Fintech and sustainable agenda.

Keywords: banking, remuneration, fintech, climate change risk, sustainability, regulation

JEL Classification: G20, G28, G38, G01, G39