By: Johnathan Lee
Since the financial crisis international regulators have pushed for overhauls of banking compensation, including deferrals of a significant portion of annual bonuses over time rather than receiving it in full at once. However, per the NY Times, it appears that U.S. banks and regulators have fallen behind their European counterparts at implementing such reforms, e.g. Barclays and Credit Suisse are deferring as much as 70% of compensation granted to top employees compared to about 50% at comparable US banks. I do not believe that regulation should be held up as the solution to the problem, however, if it does help reduce bankers’/traders’ incentive to focus on short-term returns, especially since the deferred amounts are at risk of being taken back during the waiting period if transactions turn bad, then perhaps the U.S. should at least match Europe in this regard.