The performance-related bonuses paid to bank traders lead them to take risks and should be tackled, according to researchers from the government’s CPB economic think tank in a new report.

Regulating senior executive bonuses is not enough because it is traders, not managers who are responsible for risk taking, the report said.
Traders earn large bonuses if they make high profits but face no sanctions if they make a mistake, the researchers said. This means they are driven to take risks.
The researchers suggest setting limits to the size of bonuses and making them more dependent on long-term performance as a way of increasing controls.