Bankers may benefit from the upside of risk-taking through bonuses, while taxpayers may ultimately bear the costs when things go badly wrong. After the Global Financial Crisis, regulators set out to change how bank executives are paid. This column examines how compensation practices have evolved since then and how they relate to bank risk. Longer deferral horizons, as mandated in the EU, have reduced bank risk-taking, but evidence on bonus caps is inconclusive. The 2023 banking turmoil shows that bank boards and supervisors play a crucial role in ensuring good governance of compensation frameworks. READ MORE