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Home | Events Archive | Risk Managers in Banks
Seminar

Risk Managers in Banks

  • Location
    Tinbergen Institute, room 1.01
    Amsterdam
  • Date and time

    April 09, 2025
    12:45 - 14:00

Abstract

Some bank regulators warn that risk managers (RMs) will collude with banks’ front offices (FOs) and rubberstamp investments if their bonuses depend on the performance of FOs. We show theoretically that positive pay correlation between FOs and RMs can instead be optimal. Based on data for German non-executive bank employees, we show empirically that performance pay is indeed positively correlated between RMs and FOs in practice. These pay correlations tend to be higher in banks with competent directors and in banks with stronger performance during the crisis of 2008, in line with our model predictions. Joint paper with Matthias Efing and Patrick Kampkötter.