Significant progress has been made in incorporating FSB Principles and Standards into domestic regulatory and supervisory frameworks, while compensation structures within major financial firms have been revised. However, full implementation is far from complete.
The Financial Stability Board (FSB) today issued a peer review on progress in applying the Principles for Sound Compensation Practices and their Implementation Standards.
The FSB Principles and Standards were endorsed by the G20 Leaders at their summit in London in April 2009 and Pittsburgh in September 2009. In their Pittsburgh statement, the G20 Leaders tasked the FSB “to monitor the implementation of FSB standards and propose additional measures as required by March 2010.”
Significant progress has been made in incorporating the FSB Principles and Standards into domestic regulatory and supervisory frameworks. Compensation structures in the major financial firms have changed response. But full implementation is far from complete. Sustained efforts by firms and authorities remain necessary to effectively align compensation structures in major financial institutions with prudent risk-taking.
Mario Draghi, the Chairman of the FSB, said “We welcome the steps taken to put in place frameworks for regulatory or prudential oversight of compensation structures. But supervisors must make sure that the additional measures recommended in the review are put in place.”
Firms will need to maintain momentum towards reforming their compensation practices through 2010 and beyond.
A follow-up review on compensation should be undertaken in the second quarter of 2011. By that time, more information will be available on which to judge ongoing changes in the industry and the impact of national implementation measures.
The full set of recommendations of the peer review is annexed to this release.
© Financial Stability Board
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