Remuneration Policies for Banks without Variable Remunerations: Interpretation of regulations in savings banks

Abstract

Background: After the latest financial crisis, a debate regarding risk management and remunerations within the financial sector has arisen. New regulations concerning remuneration have been launched in order to reduce short-term thinking and excessive risk-taking in the sector. Savings banks have historically had low credit losses and are considered to be risk averse; despite this the savings banks must comply with the regulations that generally are perceived to be aimed at the larger banks. Purpose: The purpose of this thesis is to understand how savings banks have interpreted regulations concerning remuneration. Method: In order to fulfill the purpose of this thesis, four minor case studies have been conducted. These minor case studies are primarily based on interviews with four savings banks, and complemented with the savings banks’ remuneration documents. In addition, we have reviewed the relevant regulations concerning remunerations. By using these three sources of material we are able to understand how savings banks have interpreted regulations concerning remuneration. Conclusion: Our conclusion is that the savings banks emphasize the importance of complying with regulations in order to gain legitimacy, but at the same time the regulations concerning remuneration policies have not resulted in any significant changes in the savings banks’ operations or remuneration system. Thus, two parallel phenomena regarding how savings banks interpret regulations concerning remuneration exist. Suggestions for further research: We suggest two areas of interest for further research. Firstly, it would be interesting to gain a deeper understanding of how FFFS 2014:1 influence savings banks’ operations. Secondly, a case study could be conducted to understand savings banks’ risk management deeper and how employees at different positions perceive and work with risk.