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Banks have not learned from the crisis, continue to pay high bonuses even in times of recession


Banks have not learned from the 2008 financial crisis and continue to pay their employees high wages. This remains the case in times of recession, and the so-called bonus caps have not changed things. Wages in the banking sector regularly rise during periods of economic growth but are very resistant to falling when the industry is not doing well, according to an international study co-authored by Alena Křížková of SYRI National Institute. The researchers compared data from 1990 to 2019 in 13 European countries.

The study sheds new light on remuneration, and in particular on the link between the financial sector and income inequality across the economy. "It confirms that the rise of the financial sector has been a major driver of the increase in income inequality. This process works through a simple and effective mechanism, which is the provision of high wages in the growing financial sector. But after the crisis, markets operate asymmetrically and incomes in the financial sector have not declined, so they could not have contributed to reducing inequality across the economy," said Křížková.

Large European banks have significantly increased their capital since 2008. Yet they have managed to maintain strong profitability. The introduction of a cap on salary bonuses within the European Union was intended to help regulate the already high incomes of financiers. However, the effect was minimal, as banks compensated for the short-term reduction in the variable component of pay by permanently increasing the fixed part of pay. "The total remuneration of leading financiers thus remained unaffected by the bonus cap," Křížková said.

According to the researchers, the high remuneration of financiers has long-term and irreversible effects on pay inequalities. "Banks and financial institutions in general clearly have very resilient financial mechanisms. When team leaders evaluate the performance of their subordinates in distributing bonuses, they take a highly asymmetric approach to their results. Profit is seen as the responsibility and success of financiers, while losses are seen as a matter of bad luck. Thus, it is common that despite high business losses, substantial bonuses are paid, especially if the responsible financiers are promising talents that banks do not want to lose," Křížková said.

In times of crisis, banks tend to cut bonuses only for their younger employees and maintain the salaries of their top staff, which they consider essential. "This asymmetry can be exacerbated by the strong bargaining power of employees in the financial sector, who can shift their activities to competitors by taking technology, customers, colleagues and subordinates with them," Křížková said.

Researchers warn that the efforts of banking institutions to keep salaries high can have negative effects on the economy as a whole. This process in turn increases global inequality. "Just because finance has lost prominence in public discourse over the past decade and has been overshadowed by the earnings of technology superstars does not mean that it no longer plays a significant role. Policymakers should consider more effective measures to reduce excessive wages than capital requirements and bonus caps. Furthermore, these measures should not be limited to traditional banks, but to all financial institutions," Křížková added.

Link to the study:


PhDr. Alena Křížková Ph.D.

Position: Senior researcher
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