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Bonus regulation: aligning reward with risk in the banking sector

Author

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  • Angeli, Marilena

    (Bank of England)

  • Gitay, Shahzad

    (Bank of England)

Abstract

Remuneration policies in the banking sector incentivised excessive risk-taking, thereby contributing to the financial crisis. Since the crisis, remuneration rules have come into force to better align employees’ incentives with the long-term health of banks and the financial system. This article explains the key components of the Prudential Regulation Authority’s remuneration rules for banks and considers the direction of the global policy agenda.

Suggested Citation

  • Angeli, Marilena & Gitay, Shahzad, 2015. "Bonus regulation: aligning reward with risk in the banking sector," Bank of England Quarterly Bulletin, Bank of England, vol. 55(4), pages 322-333.
    • Handle: RePEc:boe:qbullt:0186
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2015/bonus-regulation-aligning-reward-with-risk-in-the-banking-sector.pdf?la=en&hash=B30E9A38C3626509539B7A3890FE3D3F15F03437
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    Citations

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    Cited by:

    1. Daniel Herold, 2017. "The Impact of Incentive Pay on Corporate Crime," MAGKS Papers on Economics 201752, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. 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.
    3. Harris, Qun & Tanaka, Misa & Soane, Emma, 2020. "Does bonus cap curb risk taking? An experimental study of relative performance pay and bonus regulation," Bank of England working papers 882, Bank of England.
    4. Harris, Qun & Mercieca, Analise & Soane, Emma & Tanaka, Misa, 2018. "How do bonus cap and malus affect risk and effort choice Insight from a lab experiment," Bank of England working papers 736, Bank of England.
    5. Lisa Herzog, 2019. "Professional Ethics in Banking and the Logic of “Integrated Situations”: Aligning Responsibilities, Recognition, and Incentives," Journal of Business Ethics, Springer, vol. 156(2), pages 531-543, May.

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