Promoting Bank Stability Through Compensation Reform: Lessons from Iceland

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Promoting Bank Stability Through Compensation Reform : Lessons from Iceland. / Cullen, J.P.; Johnsen, G.

In: Icelandic Review of Politics and Administration, Vol. 11, No. 2, 17.12.2015.

Research output: Contribution to journalArticle

Harvard

Cullen, JP & Johnsen, G 2015, 'Promoting Bank Stability Through Compensation Reform: Lessons from Iceland', Icelandic Review of Politics and Administration, vol. 11, no. 2.

APA

Cullen, J. P., & Johnsen, G. (2015). Promoting Bank Stability Through Compensation Reform: Lessons from Iceland. Icelandic Review of Politics and Administration, 11(2).

Vancouver

Cullen JP, Johnsen G. Promoting Bank Stability Through Compensation Reform: Lessons from Iceland. Icelandic Review of Politics and Administration. 2015 Dec 17;11(2).

Author

Cullen, J.P. ; Johnsen, G. / Promoting Bank Stability Through Compensation Reform : Lessons from Iceland. In: Icelandic Review of Politics and Administration. 2015 ; Vol. 11, No. 2.

Bibtex - Download

@article{52c97bd227144f31b860150fb3b73f25,
title = "Promoting Bank Stability Through Compensation Reform: Lessons from Iceland",
abstract = "This article argues that the program of compensation reform at financial institutions ? despite recent wide-ranging changes ? remains incomplete. A considerable body of theoretical and empirical research has been developed which, for the most part, suggests that compensation incentives embedded in compensation contracts at banks encouraged risk-taking behaviour which contributed to the Global Financial Crisis. Extensive reforms to compensation rules at financial institutions have been implemented across the globe, including increased use of deferral, mandatory capping of bonuses and the introduction of claw-back powers. Relying on observations on the failures of Icelandic and UK banks, and legal and economic analyses of compensation reforms in each jurisdiction, this paper argues that some elements of the Icelandic and UK reform programs ought to be transposed to the EU level. Arguably, these recommendations will help improve the resilience of the European banking system and contribute to greater financial stability.",
keywords = "Bankers pay, compensation, policy making, financial regulation, prudential regulation, financial crisis, special purpose vehicles, total-returnswaps",
author = "J.P. Cullen and G. Johnsen",
note = "copyright 2015 The Author(s). This work is licensed under a Creative Commons Attribution 3.0 License (https://creativecommons.org/licenses/by/3.0/).",
year = "2015",
month = "12",
day = "17",
language = "English",
volume = "11",
journal = "Icelandic Review of Politics and Administration",
publisher = "Iceland Review of Politics and Administration",
number = "2",

}

RIS (suitable for import to EndNote) - Download

TY - JOUR

T1 - Promoting Bank Stability Through Compensation Reform

T2 - Lessons from Iceland

AU - Cullen, J.P.

AU - Johnsen, G.

N1 - copyright 2015 The Author(s). This work is licensed under a Creative Commons Attribution 3.0 License (https://creativecommons.org/licenses/by/3.0/).

PY - 2015/12/17

Y1 - 2015/12/17

N2 - This article argues that the program of compensation reform at financial institutions ? despite recent wide-ranging changes ? remains incomplete. A considerable body of theoretical and empirical research has been developed which, for the most part, suggests that compensation incentives embedded in compensation contracts at banks encouraged risk-taking behaviour which contributed to the Global Financial Crisis. Extensive reforms to compensation rules at financial institutions have been implemented across the globe, including increased use of deferral, mandatory capping of bonuses and the introduction of claw-back powers. Relying on observations on the failures of Icelandic and UK banks, and legal and economic analyses of compensation reforms in each jurisdiction, this paper argues that some elements of the Icelandic and UK reform programs ought to be transposed to the EU level. Arguably, these recommendations will help improve the resilience of the European banking system and contribute to greater financial stability.

AB - This article argues that the program of compensation reform at financial institutions ? despite recent wide-ranging changes ? remains incomplete. A considerable body of theoretical and empirical research has been developed which, for the most part, suggests that compensation incentives embedded in compensation contracts at banks encouraged risk-taking behaviour which contributed to the Global Financial Crisis. Extensive reforms to compensation rules at financial institutions have been implemented across the globe, including increased use of deferral, mandatory capping of bonuses and the introduction of claw-back powers. Relying on observations on the failures of Icelandic and UK banks, and legal and economic analyses of compensation reforms in each jurisdiction, this paper argues that some elements of the Icelandic and UK reform programs ought to be transposed to the EU level. Arguably, these recommendations will help improve the resilience of the European banking system and contribute to greater financial stability.

KW - Bankers pay

KW - compensation

KW - policy making

KW - financial regulation

KW - prudential regulation

KW - financial crisis

KW - special purpose vehicles

KW - total-returnswaps

M3 - Article

VL - 11

JO - Icelandic Review of Politics and Administration

JF - Icelandic Review of Politics and Administration

IS - 2

ER -