Compensation Practices – Implementation
The G20 Leaders in the November 2011 Cannes Summit Declaration called on the FSB to “undertake an ongoing monitoring and public reporting on compensation practices focused on remaining gaps and impediments to full implementation of these standards and carry out an ongoing bilateral complaint handling process to address level playing field concerns of individual firms”.
The FSB has designated compensation practices as one of the priority areas for implementation monitoring. The task of regular monitoring and reporting in this area is carried out by the FSB Compensation Monitoring Contact Group (CMCG). This includes monitoring and reporting on national/regional implementation in this area and on the results of the bilateral complaint handling process, a mechanism by which national supervisors from the FSB member jurisdictions work together to verify and, as needed, address specific compensation-related complaints by financial institutions that give rise to level playing field concerns.
The FSB published in October 2019 its fifth annual report on the implementation and effects of the G20 financial regulatory reforms. Below is an extract from this report on the status of implementation of compensation reforms.
Adoption of regulatory and supervisory frameworks for compensation is almost completed.
The FSB Principles and Standards for Sound Compensation Practices aim to reduce incentives for excessive risk-taking that may arise from the structure of firms’ compensation schemes. These have been implemented for all banks considered significant for the purposes of the Principles and Standards. Fewer jurisdictions have implemented the principles and standards for the insurance and asset management sectors.
The FSB’s compensation-related work is now increasingly focused on assessing the effectiveness of compensation measures and sharing effective practices.
Status of implementation
For further information, see the latest FSB compensation progress report (as of June 2019).