EU Bonus Cap Hasn’t Dampened Bankers’ Risk Appetite, Study Finds

The European Union’s cap on banker bonuses has failed to rein in risk-taking at Europe’s biggest banks, one of the purported objectives of the regulation, according to a study published by a leading German economic research institute on Tuesday.

Restrictions on variable pay merely lead to banks increasing the fixed component of executives’ salaries, Michael Koetter, head of the financial markets department at Halle Institute for Economic Research, said in a statement. In some instances, the cap may encourage even riskier behavior by top managers if performance-related bonuses have less of an influence on their overall compensation, the authors suggest.