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 November 2020 its 2020 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.
Authorities in some jurisdictions have introduced prohibitions or set supervisory expectations on compensation to address COVID-related risks.
The FSB Principles and Standards for Sound Compensation Practices (P&S) are implemented for all banks considered significant for P&S purposes. Fewer jurisdictions have implemented the P&S for the insurance and asset management sectors.
To ensure that banks preserve the capital needed to support lending, authorities in some jurisdictions have taken compensation-related measures. Consistent with the expectation in the P&S that compensation actions are risk-aligned, several jurisdictions have also asked banks to consider prudential risks when taking compensation actions.
Status of implementation
For further information, see the latest FSB compensation progress report (as of June 2019).