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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fticelandunivojs:oai:ojs.pkp.sfu.ca:article/2094 2023-08-20T04:07:26+02:00 Promoting Bank Stability through Compensation Reform: Lessons from Iceland Cullen, Jay Johnsen, Guðrún 2015-12-15 application/pdf https://ojs.hi.is/index.php/irpa/article/view/a.2015.11.2.11 eng eng Stjórnsýslustofnun https://ojs.hi.is/index.php/irpa/article/view/a.2015.11.2.11/pdf https://ojs.hi.is/index.php/irpa/article/view/a.2015.11.2.11 Copyright (c) 2015 Stjórnmál og stjórnsýsla Icelandic Review of Politics & Administration; Vol. 11 No. 2 (2015); 333-354 Stjórnmál og stjórnsýsla; Bnd. 11 Nr. 2 (2015); 333-354 1670-679X 1670-6803 Bankers pay compensation policy making financial regulation prudential regulation financial crisis special purpose vehicles total-returnswaps info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion Peer-reviewed Article 2015 fticelandunivojs 2023-08-01T12:28:55Z 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 University of Iceland: Peer Reviewed Journals |
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Open Polar |
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University of Iceland: Peer Reviewed Journals |
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fticelandunivojs |
language |
English |
topic |
Bankers pay compensation policy making financial regulation prudential regulation financial crisis special purpose vehicles total-returnswaps |
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Bankers pay compensation policy making financial regulation prudential regulation financial crisis special purpose vehicles total-returnswaps Cullen, Jay Johnsen, Guðrún 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 |
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 |
Cullen, Jay Johnsen, Guðrún |
author_facet |
Cullen, Jay Johnsen, Guðrún |
author_sort |
Cullen, Jay |
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 |
Stjórnsýslustofnun |
publishDate |
2015 |
url |
https://ojs.hi.is/index.php/irpa/article/view/a.2015.11.2.11 |
genre |
Iceland |
genre_facet |
Iceland |
op_source |
Icelandic Review of Politics & Administration; Vol. 11 No. 2 (2015); 333-354 Stjórnmál og stjórnsýsla; Bnd. 11 Nr. 2 (2015); 333-354 1670-679X 1670-6803 |
op_relation |
https://ojs.hi.is/index.php/irpa/article/view/a.2015.11.2.11/pdf https://ojs.hi.is/index.php/irpa/article/view/a.2015.11.2.11 |
op_rights |
Copyright (c) 2015 Stjórnmál og stjórnsýsla |
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