Featured Product

    FSB Publishes Takeaways from Workshop on Sound Compensation Practices

    August 09, 2021

    The Financial Stability Board (FSB) published a summary of the key takeaways from its virtual, industry workshop, which was a part of the regular assessment of effectiveness of the implementation of the principles for sound compensation practices and the associated implementation standards. The workshop was an opportunity to exchange information on key compensation issues and challenges for the effective alignment of risk and compensation, with an additional focus on the impact of the pandemic on firms’ compensation practices.

    At the workshop, the participants:

    • identified trends in the use of non-financial criteria, potential differences across sectors, and how these criteria affect and are affected by firm culture. Firms expect the use of non-financial criteria such as reputation, diversity and inclusion, and environmental, social and governance (ESG) factors to be even more widespread over the next five years and continue to reinforce the firm culture.
    • identified effective practices for alignment between risk and compensation and how practices may vary across sectors. Firms highlighted the critical role of internal control functions in governance and remuneration. They also noted that, at the level of board committees, a mechanism to ensure close collaboration between risk and remuneration committees exists. Firms acknowledged that remuneration is one of the most influential drivers of risk alignment; however, the overall corporate culture plays an important role in addressing various kinds of misconduct.
    • focused on the most significant legal and regulatory impediments to the use of compensation tools, such as malus and claw-back and possible steps to address these. The session also explored firms’ use of severance pay.
    • discussed compensation-related actions firms and supervisors have taken in relation to the pandemic, noting that most remuneration frameworks were sufficiently flexible to respond to the prolonged pandemic. The firms did not require a overhaul to their frameworks and some regulators saw better alignment of values as well as incorporation of ESG metrics in the firms they supervise. One authority observed changes, such as better alignment of firms’ compensation plans to their values and the creation of programs to encourage employees to work in the best interest of customers; this was driven by both external pressure and the adoption of ESG metrics in its strategy and objectives. One firm also mentioned that it implemented more transparent disclosures during the pandemic.


    Related Links

    Keywords: International, Banking, Insurance, Securities, Remuneration, Compensation Practices, Governance, ESG, COVID-19, Operational Risk, FSB

    Featured Experts
    Related Articles

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023

    March 02, 2023 WebPage Regulatory News

    German Regulators Issue Multiple Reporting Updates for Banks

    Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8806