The Bank for International Settlements released research on September 14, 2026, suggesting that EU bonus caps for bankers may have increased risk-taking. The policy, implemented in 2013-14, limits variable pay for risk-takers to 100% of fixed salary, or 200% with shareholder approval.
The study indicates that banks responded to these caps by raising base salaries. This shift provides managers with guaranteed income regardless of project outcomes, creating a moral hazard where risky ventures appear more attractive due to the lack of downside for the individual.
The research notes that institutions subject to these caps did not show reduced risk profiles and may have experienced higher systemic risk. Additionally, higher fixed costs make banks less flexible during financial stress, as base salaries are harder to reduce than bonuses.
The European Commission began a formal review of the bonus cap framework in February 2026, citing concerns over competitiveness. Meanwhile, the UK has already abolished its own bonus cap, opting instead for deferred compensation and clawback provisions to manage incentives.
