Bonus regulation: aligning reward with risk in the banking sector

Quarterly Bulletin 2015 Q4
Published on 15 December 2015

By Marilena Angeli and Shahzad Gitay from the Bank’s Cross-Sectoral Policy Division.

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.

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