As part of its broader effort to address misconduct risk at large, globally active banks, the Basel, Switzerland-based Financial Stability Board on Friday issued recommendations for compensation data reporting. The recommendations include two data sets that the FSB intends to help national bank regulators more consistently assess the role of compensation in misconduct risk.
These data sets encompass compensation frameworks to address misconduct risk and the governance and compensation actions taken in the event of misconduct. Individual data elements include the individuals subject to compensation frameworks, processes for monitoring a firm’s compensation practices, performance incentive design and the availability of “compensation adjustment tools” like clawbacks. The FSB also recommended that regulators collect data on misconduct incidents that firms investigate and all compensation adjustments they make.
The FSB said that these recommendations are aimed at the largest “significant financial institutions” and that they “do not establish new principles or standards beyond those already established…nor are they designed to be ‘one size fits all.’”