IMF: Risk Taking By Banks: The Role Of Governance And Executive Pay

There is broad consensus that excessive risk taking by banks contributed to the global financial crisis. Equally important were lapses in the regulatory framework that failed to prevent such risk taking. Reforms are under way to further strengthen the regulatory framework, realign incentives, and foster prudent behavior by bankers. These reforms aim to enhance capital and liquidity buffers and influence the incentives that induce bankers to take excessive risk. Regarding the latter, measures