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Point of View
Should Bank CEOs Do as Poorly as Bank Investors?
It was a bad year for banking. But was it a bad year for bank CEOs? Let’s look at the numbers. Compensation committees had to make decisions this spring about incentive pay tied to performance in 2023. Rising interest rates led to lower profitability for the industry overall. Theoretically, many banks should become more profitable as interest rates rise, because they can charge more for loans. However, many banks loaded up on bonds when interest rates were low, causing high levels of unrealized losses in their bond portfolios when rates rose. Rising rates meant deposit costs often outstripped higher yields…
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