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European banks’ executive remuneration under the new European Union regulation

Pablo de Andrés, Rodrigo Reig and Eleuterio Vallelado

Journal of Economic Policy Reform, 2019, vol. 22, issue 3, 208-225

Abstract: We review how the new European regulation of bank executive compensation could affect the future of banking in Europe. Although there is no conclusive empirical evidence on the relation between bank executive remuneration and the financial crisis, authorities have intensively regulated the compensation of bank managers to eliminate risk-taking incentives in the financial industry. However, the new regulation could have unintended consequences of creating an adverse selection problem at European banks, reducing the number of best-performing managers available for European banks, and motivating an excessive increase in fixed remuneration over total remuneration, altering the way incentive systems work.

Date: 2019
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DOI: 10.1080/17487870.2018.1424630

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