BoE paper reports ‘lab experiment’ on banker bonuses

Sterling

A “lab experiment” by a group of economists has found that a laissez-faire approach to bankers’ bonuses tends to encourage additional risk-taking.

The experiment, published in a recent Bank of England staff working paper, found those who were paid a straightforward bonus proportional to their investment returns – but zero for any losses – took higher risks than they would if investing their own money.

A second group was subject to a bonus cap and a third faced “malus” – the possibility of losi

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