Todd Henderson's 'Regulation' Article on Paying Bank Examiners for Performance
Paying Bank Examiners for Performance
April 5, 2012
"Bank regulators are not paid for performance. They are civil servants paid a fixed salary that does not depend on whether their actions improve banks’ performance, protect banks from failure, or increase social welfare. In fact, trying to curb risk taking at a bank may be personally very costly for a bank regulator. Without a larger upside than what civil service compensation offers, regulators too often do the rational thing and play it safe, shying away from confrontation over potentially ill-advised bank policies."