Financial Stability Board Consults on Reporting on the Use of Compensation Tools to Address Misconduct Risk

The Financial Stability Board has published proposed Recommendations for consistent national reporting of data concerning the use of compensation tools to address misconduct risk in significant financial institutions. The FSB is proposing a supervisory framework for the collection and reporting of data, which can be used by supervisors for monitoring and analyzing the effectiveness of compensation frameworks in addressing misconduct risk. The information so collected is intended to assist supervisors to understand and review: (i) the importance of individual conduct within the firm's incentive compensation framework and the role of compensation policy in establishing a sound risk and conduct culture; and (ii) the use of compensation tools in practice and their role in ensuring accountability when misconduct occurs.

The proposed Recommendations are directed to relevant national supervisory authorities for firms in all financial sectors. For the banking sector, the proposals take into account disclosures of compensation required under the Basel Committee on Banking Supervision's Pillar 3 framework.

Alongside the consultation paper, the FSB has also published a summary of an industry workshop held in December 2017, which informed the FSB's work in developing the proposed Recommendations.

The FSB is seeking feedback on the proposed Recommendations as well as on nine specific questions relating to the scope of data that should be collected, impediments to the collection or use of data, relevance of data and the types of information that have been most useful to firms in monitoring and assessment of potential misconduct. The FSB also welcomes feedback on the topics covered in the workshop summary note. The consultation closes on July 6, 2018.

View the consultation paper.

View the Workshop summary note.