Promoting Bank Stability through Compensation Reform: Lessons from Iceland
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 c...
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Language: | English Icelandic |
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University of Iceland
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Online Access: | https://doi.org/10.13177/irpa.a.2015.11.2.11 https://doaj.org/article/4bd4799f21e048ffa4efa30b66086b20 |
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ftdoajarticles:oai:doaj.org/article:4bd4799f21e048ffa4efa30b66086b20 2023-05-15T16:50:14+02:00 Promoting Bank Stability through Compensation Reform: Lessons from Iceland Jay Cullen Guðrún Johnsen 2015-12-01T00:00:00Z https://doi.org/10.13177/irpa.a.2015.11.2.11 https://doaj.org/article/4bd4799f21e048ffa4efa30b66086b20 EN IS eng ice University of Iceland http://www.irpa.is/article/view/2094 https://doaj.org/toc/1670-6803 https://doaj.org/toc/1670-679X 1670-6803 1670-679X doi:10.13177/irpa.a.2015.11.2.11 https://doaj.org/article/4bd4799f21e048ffa4efa30b66086b20 Stjórnmál og Stjórnsýsla, Vol 11, Iss 2, Pp 333-354 (2015) Bankers pay compensation policy making financial regulation prudential regulation financial crisis special purpose vehicles total-returnswaps Political institutions and public administration (General) JF20-2112 Political science (General) JA1-92 article 2015 ftdoajarticles https://doi.org/10.13177/irpa.a.2015.11.2.11 2022-12-31T00:20:17Z 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. Article in Journal/Newspaper Iceland Directory of Open Access Journals: DOAJ Articles Veftímaritið Stjórnmál og stjórnsýsla 11 2 333 |
institution |
Open Polar |
collection |
Directory of Open Access Journals: DOAJ Articles |
op_collection_id |
ftdoajarticles |
language |
English Icelandic |
topic |
Bankers pay compensation policy making financial regulation prudential regulation financial crisis special purpose vehicles total-returnswaps Political institutions and public administration (General) JF20-2112 Political science (General) JA1-92 |
spellingShingle |
Bankers pay compensation policy making financial regulation prudential regulation financial crisis special purpose vehicles total-returnswaps Political institutions and public administration (General) JF20-2112 Political science (General) JA1-92 Jay Cullen Guðrún Johnsen Promoting Bank Stability through Compensation Reform: Lessons from Iceland |
topic_facet |
Bankers pay compensation policy making financial regulation prudential regulation financial crisis special purpose vehicles total-returnswaps Political institutions and public administration (General) JF20-2112 Political science (General) JA1-92 |
description |
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. |
format |
Article in Journal/Newspaper |
author |
Jay Cullen Guðrún Johnsen |
author_facet |
Jay Cullen Guðrún Johnsen |
author_sort |
Jay Cullen |
title |
Promoting Bank Stability through Compensation Reform: Lessons from Iceland |
title_short |
Promoting Bank Stability through Compensation Reform: Lessons from Iceland |
title_full |
Promoting Bank Stability through Compensation Reform: Lessons from Iceland |
title_fullStr |
Promoting Bank Stability through Compensation Reform: Lessons from Iceland |
title_full_unstemmed |
Promoting Bank Stability through Compensation Reform: Lessons from Iceland |
title_sort |
promoting bank stability through compensation reform: lessons from iceland |
publisher |
University of Iceland |
publishDate |
2015 |
url |
https://doi.org/10.13177/irpa.a.2015.11.2.11 https://doaj.org/article/4bd4799f21e048ffa4efa30b66086b20 |
genre |
Iceland |
genre_facet |
Iceland |
op_source |
Stjórnmál og Stjórnsýsla, Vol 11, Iss 2, Pp 333-354 (2015) |
op_relation |
http://www.irpa.is/article/view/2094 https://doaj.org/toc/1670-6803 https://doaj.org/toc/1670-679X 1670-6803 1670-679X doi:10.13177/irpa.a.2015.11.2.11 https://doaj.org/article/4bd4799f21e048ffa4efa30b66086b20 |
op_doi |
https://doi.org/10.13177/irpa.a.2015.11.2.11 |
container_title |
Veftímaritið Stjórnmál og stjórnsýsla |
container_volume |
11 |
container_issue |
2 |
container_start_page |
333 |
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1766040402280841216 |