E-reward guide to the regulation of remuneration policies in financial services

FINANCIAL SERVICES

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.




CONTENTS

INTRODUCTION

  • What this report covers

  • Complex picture

  • Box: Summary of key developments in global pay regulation

SECTION 1: THE CONTEXT – CRISIS IN THE FINANCIAL SERVICES INDUSTRY

SECTION 2: UK REGULATION

  • Turner Review

  • FSA Code of Practice on Remuneration

  • UK Financial Investments Ltd (UKFI)

  • HM Treasury

  • White Paper

  • Walker Review

  • Combined Code review

  • FSA Remuneration Policy Statement Questionnaire

SECTION 3: EUROPEAN REGULATION

  • EU Recommendations

  • 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?

  • Evolving picture

  • Future developments

SECTION 6: SOURCES OF INFORMATION

  • Web links to key documents

DOCUMENT EXTRACTS

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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