Articles - Actuaries calculating Bankers bonuses


 “Actuaries should be involved in calculating banking bonuses as they are trained to determine where there are any unacceptable risks being taken. As actuaries it is the long term that concerns us, says Dr Geraldine Kaye, an actuary herself and managing director of actuarial recruitment consultancy GAAPS Actuarial.

 “Where there are enormous bonuses for profitable performance and with no downside for poor performance, you can only encourage risky and in some cases even irresponsible behaviour.

 “With-profit life policies fell out of favour because non-actuaries could not understand the smoothing techniques that were used and required. A variation of those techniques, but with much better communication of what is being done, would be very well suited to smoothing bankers’ bonuses. Once bonuses are accurately spread over several years, then traders would have to be much more careful that the risks they take will not result in large or even catastrophic losses.

 “All it requires is for a few actuaries to enter this area of work and to be seen actively involved in calculating banking bonuses, then others will be able to follow.”
  

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