In May 2016 the Financial Stability Board (FSB) hosted a roundtable to share experiences and lessons on compensation tools to address misconduct in banks. The participants included senior executives responsible for risk and remuneration functions at 22 large internationally active banks, together with officials from the FSB's compensation monitoring contact group (CMCG).
The FSB has now published a note summarising the discussions that took place at the roundtable, welcoming feedback on the topics discussed from the wider financial services industry. Some key points to note from the summary include (among others):
- The discussions make it clear that compensation tools are just part of the toolkit used in reducing the risks of misconduct.
- Participants indicated that there has already been a significant change in the way firms view compensation as a tool to address misconduct. Firms recognise there is a direct link between compensation and conduct and increasingly look to actively manage conduct through compensation tools, but they also note that these tools should not be over-emphasised.
- At most firms, codes of conduct set the framework for expected behaviour, and explicit expectations surrounding roles and responsibilities are emphasised. Participants emphasised the importance of "tone from the top".
- A number of participants noted that they would welcome more guidance from regulators. Supervisors are considered to have an important role to play in identifying better practices and conveying them to the industry, so that firms know whether they are on the right track.
The deadline for feedback on the topics discussed is 21 August 2016.