May 07, 2018

FSB launched a consultation on the recommendations for consistent national reporting of data on the use of compensation tools to address misconduct risk. FSB also published a summary note of an industry workshop that was organized last December as part of the FSB work to develop these recommendations. Feedback is invited by July 06, 2018. FSB also welcomes feedback on topics discussed at the workshop that are included in the summary note.

The recommendations are a part of the FSB’s 2015 workplan on measures to reduce misconduct risk. The proposed data set included in the recommendations is designed to help firms and supervisors answer a number of important questions, including whether governance and risk management processes surrounding compensation:

  • Appropriately include conduct considerations in the design of their compensation and incentive systems, including the setting of individual goals, ex ante performance measurement mechanisms and ex post compensation adjustments

  • Support the effective use of compensation tools to help promote good conduct or to remediate individual conduct that is not in line with the firm’s expectations, including holding individuals accountable for any misconduct that occurs

  • Promote wider risk management goals, including for conduct issues, consistent with the firm’s strategy and risk tolerance

  • Support the effective identification of emerging misconduct risks and, where appropriate, review use of incentive systems and compensation decisions in response to conduct incidents to ensure alignment of incentives, risk, and reward

The recommendations must be viewed in light of the existing national laws and in a manner consistent with the supervisory powers individual regulators have been granted. Decisions on the scope of data gathering, the types of data, and the appropriate data gathering cycle and frequency are solely for national supervisory authorities to make; such decisions should consider the types of supervisory work conducted, the relevant legislative and regulatory framework, the extent to which data is already collected, whether the firm is a significant financial institution, and the specific risk profile or financial activities of the firm.


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Comment Due Date: July 06, 2018

Keywords: International, Banking, Securities, Insurance, Misconduct Risk, Compensation Reporting, Recommendations, FSB