FSB Launches Second Peer Review On Compensation Practices

Press Release
May 18, 2011
The Financial Stability Board (FSB) has launched its second peer review on compensation practices. The review will assess the progress made by national authorities and significant financial institutions in implementing the FSB Principles for Sound Compensation Practices and their Implementation Standards, as well as the impact on compensation practices at financial institutions of national policy measures taken to implement the Principles and Standards.

The FSB Principles for Sound Compensation Practices and their Implementation Standards were endorsed by the G20 Leaders at their summits in London in April 2009 and Pittsburgh in September 2009. The FSB completed its first peer review on compensation in March 2010 (available here), concluding that, at that relatively early stage in the process, some key issues were yet to be resolved and effective implementation was far from complete.

The 2010 review therefore recommended that the FSB undertake a follow up review in 2011. In the meantime, the G20 Leaders, at the June 2010 Toronto Summit, encouraged all countries and financial institutions to fully implement the FSB Principles and Standards by end-2010.

The 2011 review will assess the different approaches to implementing the FSB Principles and Standards by surveying supervisors and regulators and by surveying a sample of major firms directly. The responses of supervisors and regulators, and aggregated responses of firms will be analyzed and discussed by the FSB later this year. The questionnaires being used for the surveys are attached. The peer review report will be published in the autumn.

As part of this peer review, in addition to the information to be collected via the surveys, the FSB invites feedback from financial institutions, industry associations, and other stakeholders on their experiences regarding compensation practices, either in a particular country or across several countries. This could include comments on: gaps in regulatory and supervisory oversight; progress and potential challenges faced by firms in implementing the FSB Principles and Standards; and how market practices have evolved in recent years,
including possible examples of leading practices in compensation structures and policies.

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Feedback should be submitted by 15 June 2011 to fsb@bis.org under the subject heading “FSB Peer Review on Compensation Practices.” Individual submissions will not be made public.

See related documents from the FSB on the initiative here.



Notes to editors
The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.

The FSB began a regular programme of peer reviews in 2010, consisting of thematic reviews and country reviews. Previously published review reports comprise three thematic peer reviews – on compensation practices, risk disclosure practices relating to structured credit products and certain other exposures, and mortgage underwriting practices – and three country peer reviews – of Mexico, Spain and Italy. The reports are available on the FSB website.

Thematic peer reviews focus on implementation of international financial standards, policies agreed within the FSB or, where such standards or agreed policies do not exist, a stocktaking of existing practices in the policy area. The objectives of the reviews are to encourage consistent cross-country and cross-sector implementation, to evaluate the extent to which standards and policies have had their intended results and, where relevant, to make recommendations for potential follow-up by regulators, supervisors and standard setters. They provide an opportunity for FSB members to engage in dialogue with their peers and to
share lessons and experiences.

The FSB is chaired by Mario Draghi, Governor of the Bank of Italy. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

For further information on the FSB, visit the FSB website, www.financialstabilityboard.org.