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Compensation was one talking point on a list of many topics when the seven big bank CEOs testified on Capitol Hill. It’s the first time that the large bank CEOs have simultaneously addressed Congress since the financial crisis.
CEO pay levels dipped during the crisis as companies pared back salaries to avoid the optics of inappropriate executive pay. They also dipped because the government required banks that took bailout money to impose temporary salary caps on its executives.
The steady climb up in bank CEO pay since the crisis has been the result of the banks’ improving performance, says Laura Hay, head of the banking industry team at executive pay consultancy Pearl Meyer. Hay says that in addition to a favorable U.S. economy that continues to extend its recovery, banks are benefiting from the regulatory pendulum swinging toward reduced red tape on the industry.
“For a while, because of the increased capital requirements, banks tended to be less profitable and they’re over that hump now,” Hay told Yahoo Finance. “The decrease on that regulation has a direct effect on why these banks are receiving record profits.”
Policymakers are still grappling with whether legislative or bureaucratic action is necessary for executive pay. The post-crisis Dodd-Frank regulatory framework required regulators to implement reporting requirements and some limitations on executive pay. But ten years after the crisis, some reform measures are still in the pipeline.
Hay said she does not see any major executive pay changes coming anytime soon, also ruling out any explicit caps on bankers’ pay—like the bonus cap implemented by the European Bank Authority.
“It would be so un-American,” Hay said. “I don’t think you’ll see it from this administration.”