Excess Liquidity and Bank Managers’ Remuneration: The Role of Monetary Policy

Abstract

This paper investigates the impacts of monetary policy on bank managers’ remuneration in Vietnam and China where excess liquidity is present in the economies. The study argues that excess liquidity provides the condition to conceal risk taken by bank managers, and hence their remunerations are improved. However, the capability of excess liquidity in concealing risk is attenuated during the tightening monetary policy regime. The study extends the relationship between monetary policy and risk taking incentives of bank managers to the context of excess liquidity condition.