Template-Type: ReDIF-Article 1.0
Author-Name: Gaston Gelos
Author-Name: Bertrand Rime
Author-Name: Kevin Tracol
Title: Bank executive compensation and risk-taking
Abstract: This article investigates the evolution of bank compensation practices since the Great Financial Crisis (GFC) and how it relates to bank risk. Despite the lessons learned from the GFC, performance metrics for bank executives generally do not account for risk. EU regulation requiring banks to extend their deferral horizons has reduced risk-taking. By contrast, our evidence is not conclusive regarding restrictions on the share of variable compensation. A case study of the 2023 banking turmoil indicates that bank governance failed to ensure that compensation schemes accounted for risk-taking, to recognise the deterioration of performance and to adjust compensation accordingly.
Journal: BIS Quarterly Review
File-URL: https://www.bis.org/publications/bank-executive-compensation-and-risk-taking.pdf
File-Format: Application/pdf
File-URL: https://www.bis.org/publications/bank-executive-compensation-and-risk-taking
File-Format: text/html
Year: 2026
Month: September
Classification-JEL: G21, G28, J33
Handle: RePEc:bis:bisqtr:2609c