E-reward guide to the regulation of remuneration policies in financial services
The financial services sector is unique in many ways, not least because of the far-reaching regulatory regime through which financial services firms’ actions are constrained. Regulation governs firms’ internal management controls, the amount of capital and liquidity they maintain, the way that products are sold to customers, and the competence and integrity of their employees. It covers pay too, but this has always been well down the list of priorities for the regulators. This is about to change dramatically, as financial services firms become subject to a new global regulatory framework for remuneration.
What this report covers
E-reward commissioned Andrew Menhennet, Director of AM Reward Consulting, an independent reward consultancy, to prepare a report summarising the current position in the ongoing development of that framework. Andrew’s in-depth analysis:
looks at the context – the collapse in confidence in the banking industry that triggered a worldwide recession
outlines the main features of each of the major initiatives in the UK, Europe and globally
points to the likely future development of the framework.
A series of appendices show extracts from the various sets of guidelines, and the reference in section 6 contains web links to the full PDF documents online. This e-reward report sets out the key documents as they stand at the time of writing in mid-October 2009.
What this report covers
Box: Summary of key developments in global pay regulation
SECTION 1: THE CONTEXT – CRISIS IN THE FINANCIAL SERVICES INDUSTRY
SECTION 2: UK REGULATION
FSA Code of Practice on Remuneration
UK Financial Investments Ltd (UKFI)
Combined Code review
FSA Remuneration Policy Statement Questionnaire
SECTION 3: EUROPEAN REGULATION
The Committee of European Banking Supervisors (CEBS)
Principles Draft Capital Requirements Directive (CRD) Amendments
Document 3.1: Draft Capital Requirements Directive – Remuneration Principles
SECTION 4: GLOBAL REGULATION
The role of the G20
The Financial Stability Board (FSB)
Principles and Implementation Standards
Other national supervisory action
SECTION 5: WHAT’S NEXT?
SECTION 6: SOURCES OF INFORMATION
Web links to key documents
1: Financial Services Authority, August 2009 - Reforming Remuneration Practices in Financial Services: Feedback on CP09/10 and final rules
2: Sir David Walker, July 2009 - A Review of Corporate Governance in UK Banks and Other Financial Industry Entities
3: European Commission, April 2009 - Commission Recommendation on Remuneration Policies in the Financial Services Sector
4: Committee of European Banking Supervisors, April 2009 - High-level Principles for Remuneration Policies
5: Financial Stability Forum, April 2009 - FSF Principles for Sound Compensation Practices
6: Financial Stability Board, September 2009 - FSB Principles for Sound Compensation Practices: Implementation Standards
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