Featured Product

    FSB Assesses Implementation of Compensation Standards and Principles

    June 17, 2019

    FSB published the sixth progress report on the implementation of its principles and standards for sound compensation practices in financial institutions. The report assesses how compensation practices have evolved since 2009. The progress report finds that FSB jurisdictions implemented the principles and standards for sound compensation for all banks that are considered significant for the purpose of the principles and standards. While most banks have put in place practices and procedures that reduce the potential for inappropriate risk-taking, their effectiveness is still being tested. FSB also published a document that provides links to information on the FSB member jurisdictions’ national regulation and supervisory guidance on compensation.

    The report finds that, at most banks, further work is required to validate that practices and procedures operate effectively and cover all compensation-related risks. International supervisory dialog facilitated increased attention to compensation design and implementation, contributing to better practices. Authorities remain focused on compensation practices, with many of them incorporating assessment of compensation practices as part of the ongoing supervisory review processes. The report highlights that for significant banks a number of changes have taken place. Boards appear more active and engaged and compensation processes are now conducted with greater oversight. Compensation arrangements now have longer time horizons, include mechanisms that better align them with effective risk management practices and include a wider range of financial and non-financial risk assessment criteria. Moreover, in recent years, there has been an increased focus on compensation as a tool to address conduct risk, along with a greater emphasis on how results are achieved.

    The report assesses several jurisdictions, including Argentina, Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Korea, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Switzerland, Turkey, United Kingdom, and the United States. The FSB principles and implementation standards are intended to apply to financial institutions that are significant for the purposes of compensation standards including banks, insurers, and asset managers. In most jurisdictions, the identified institutions are mainly in the banking sector. Fewer jurisdictions have implemented the requirements for the insurance and asset management sectors. The challenge now is to develop frameworks for assessing the effectiveness of compensation policies and practices in balancing risk and reward. As supervisors continue to monitor compensation practices, they will need to ensure that compensation remains aligned with prudent risk-taking and fully reflects the evolving risks and the new areas of vulnerabilities as they emerge. 

     

    Related Links

    Keywords: International, Banking, Insurance, Securities, Compensation Practices, Progress Report, Operational Risk, Conduct Risk, FSB

    Related Articles
    News

    APRA Reviews Repayment Deferral Plans, Identifies Best Practices

    APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.

    September 22, 2020 WebPage Regulatory News
    News

    ESAs Assess Risks to Financial Sector After COVID-19 Outbreak

    ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.

    September 22, 2020 WebPage Regulatory News
    News

    BoE Confirms Withdrawal of COVID Corporate Financing Facility

    BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.

    September 22, 2020 WebPage Regulatory News
    News

    ECB Allows Temporary Relief in Leverage Ratio Amid COVID-19 Pandemic

    ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.

    September 21, 2020 WebPage Regulatory News
    News

    ESAs Launch Survey on Templates for Product Disclosures Under SFDR

    ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).

    September 21, 2020 WebPage Regulatory News
    News

    ECB Proposes Integrated Reporting Framework to Reduce Burden for Banks

    ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.

    September 21, 2020 WebPage Regulatory News
    News

    EC Deems UK Framework for CCPs Temporarily Equivalent to EMIR Rules

    EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).

    September 21, 2020 WebPage Regulatory News
    News

    EBA to Phase Out Guidelines on Loan Repayment Moratoria

    EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.

    September 21, 2020 WebPage Regulatory News
    News

    EBA Provides Opinion on Definition of Credit Institution in CRR

    EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).

    September 18, 2020 WebPage Regulatory News
    News

    ECB Finalizes Methodology to Assess CCR and A-CVA Risk of Banks

    ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.

    September 18, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5820