FSB published the fifth progress report on implementation of FSB Principles for Sound Compensation Practices and their Implementation Standards. The report, which was prepared by the FSB Compensation Monitoring Contact Group, focuses on remaining implementation gaps, key challenges, and evolving practices. The report also examines links between compensation and misconduct and provides insight into compensation practices in the securities sector, the issues which have been in focus since the publication of the last report in November 2015.
The progress report shows that almost all FSB member jurisdictions have substantively implemented the Principles and Standards for banks. Indonesia and Turkey have addressed significant gaps identified at the time of the last progress report in 2015, while South Africa is yet to fully implement them. With the help of increased use of back testing or validating compensation practices and policies, supervisors and banks are working to ensure effective implementation of compensation systems. The report shows that in-year adjustments to compensation continue to be the compensation tool of choice. The progress report includes a section on compensation practices in the securities sector, written jointly by FSB and IOSCO. Most of the surveyed IOSCO members have some compensation-related regulation in place. The report concludes that compensation practices vary across the securities sector. This variation mainly stems from the diversity of firms and their business models and activities. FSB will continue to explore ways to further assess the effectiveness of aligning compensation policies with risk at financial institutions.
Keywords: FSB, International, Progress Report, Compensation Practices, Banking, Insurance, Securities
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