Abstract
On 27 February 2013, the European Union (EU) reached a provisional deal to limit the amount of bankers' bonuses to the amount of fixed remuneration (i.e., a one-to-one ratio); the cap could be increased to 2:1 with the backing of a supermajority of shareholders. I demonstrate that the pending EU regulations restrictions will: (1) increase rather than decrease incentives for excessive risk taking; (2) result in significant increase in fixed remuneration; (3) reduce incentives to create value; (4) reduce the competitiveness of the EU banking sector; and (5) result in a general degradation in the quality of EU investment bankers, thereby decreasing access to capital and increasing the cost of capital in the European Union.
Disciplines
Banking and Finance | Comparative and Foreign Law | Corporation and Enterprise Law | European Law | Foreign Law | Law
Date of this Version
4-4-2013
Recommended Citation
Kevin J. Murphy, "Regulating Banking Bonuses in the European Union: A Case Study in Unintended Consequences" (April 2013). University of Southern California Law and Economics Working Paper Series. Working Paper 166.
http://law.bepress.com/usclwps-lewps/166
Included in
Banking and Finance Commons, Comparative and Foreign Law Commons, Corporation and Enterprise Law Commons, European Law Commons, Foreign Law Commons