Experiment finds bonus caps can reduce risk-taking

BoE paper says bonus caps can work, in contrast to earlier work

Bank of England
The Bank of England
Juno Snowdon Photography

Research published by the Bank of England finds bonus caps may be effective in reducing risk-taking, a finding that contrasts with the central bank’s earlier hostility to the policy.

Qun Harris, Misa Tanaka and Emma Soane conducted a “lab experiment” with 253 participants to test how different aspects of the bonus cap and “malus” regime work. Malus involves lowering a deferred bonus payment if certain conditions materialise.

The authors find that bonus caps can reduce risk-taking, though they

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