Today, the Basel Committee on Banking Supervision issued a report entitled Compensation Principles and Standards Assessment Methodology. The Report seeks to "help supervisors assess a firm's compliance with the Financial Stability Board's (FSB) Principles for Sound Compensation Practices (Principles) and further foster supervisory approaches that are "effective in promoting sound compensation practices at banks and help support a level playing field."
The Report is structured around the three issues addressed by the FSB Principles: (i) effective governance of compensation, (ii) effective alignment of compensation with prudent risk-taking, and (iii) effective supervisory oversight and engagement by stakeholders, and proceeds to provide an assessment methodology, including supervisory objectives and supervisory guidance, proposing various approaches and information that "could be used by supervisors in conducting reviews" based on the foregoing FSB Principles. It is the intent of this methodology to "contribute to a better understanding of bank remuneration practices and to the identification of best risk management practices." The Report notes that the assessment methodology "proposes a series of clear and common elements on which compliance (or progress made) could be assessed," however it is "not meant" to be used to assess which best practices have been taken into account by various financial institutions.