BPI letter to FSB re Recommendations for Consistent National Reporting of Data on Compensation Tools to Address Misconduct Risk

BPI letter to FSB re Recommendations for Consistent National Reporting of Data on Compensation Tools to Address Misconduct Risk

On July 6, BPI filed a comment letter with the FSB on its proposed Recommendations for consistent national reporting of data on the use of compensation tools to address misconduct risk. The letter stated that (i) the FSB’s Recommendations and compensation and misconduct efforts generally are not based on any clear FSB analysis or evidence that compensation practices have had or could have a material effect on financial stability, which is the group’s remit and (ii) the FSB has provided no additional analysis or explanation why a single global reporting standard on the use of certain compensation practices is a useful and effective tool for addressing financial stability risks, given the substantial variance among member jurisdictions’ labor and employment laws, compensation practices, and other relevant factors. Furthermore, it argued that the Recommendations are unnecessary given the evolution of local regulatory frameworks for bank compensation and would establish a uniform data collection framework that could lead to a one-size-fits-all standard for using compensation tools to address misconduct as well as uniform compensation setting mechanisms which would adversely impact misconduct risk mitigation.

The letter recommended that the FSB defer to the supervisory frameworks already in place in member jurisdictions by retracting the Recommendations, but offered a number of recommendations to make the proposed data collection framework more principles-based and better tailored to misconduct risk, so as to minimize the extent to which it undermines financial institutions’ and member jurisdictions’ work to address such risk, should the FSB choose to finalize the Recommendations.

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Disclaimer:

The views expressed do not necessarily reflect those of the Bank Policy Institute’s member banks, and are not intended to be, and should not be construed as, legal advice of any kind.