E-reward commissioned Andrew Menhennet, Director of AM Reward Consulting, an independent reward consultancy, to update his 2009 e-reward report summarising the current position in the ongoing development of the regulatory framework for remuneration in financial services.
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This new report:
explains the revised FSA Code in depth – how it works, who it covers, the main elements
provides detailed “Guidance for supervisors” on the revised FSA Code, extracted from reports issued by the Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA), and explains how this can help firms understand what is expected of them under the Code
looks in detail at the FSA’s final rules on disclosure of remuneration
examines the background to the revised Code and how familiarity with this broader context can assist reward practitioners in understanding and implementing the revised Code.
Section 5 lists the key publications we have analysed in researching and writing this report, with web links so that you can download the relevant document in PDF format. Section 6 contains a glossary of terms. There then follows a series of checklists and document extracts.
Click here to download the contents and introductory pages in PDF format.
SECTION 1: INTRODUCTION
The context - crisis in the financial services industry
What you will find in this report
Summary of key findings
SECTION 2: THE REVISED FSA CODE
What is the Financial Services Authority?
How does the revised Code work?
Which firms are in scope?
The “de minimis” concession
Phased implementation of the Code
What are the main elements?
Principles 1-5: Risk management and governance
Principles 6, 7, 9, 10 and 11: Capital, government intervention, pensions, hedging and avoidance
Principle 8: Risk adjustment
Principle 12: Remuneration structures:
Guaranteed variable pay
Ratio of fixed to variable pay
Form in which variable pay is paid
Malus and clawback
SECTION 3: DISCLOSURE
Overview of FSA final rules on disclosure
What firms must disclose
Disclosure and proportionality
SECTION 4: BACKGROUND TO THE CODE REVISIONS – REGULATORY DEVELOPMENTS IN 2010
FSB - Peer Review
BCBS - Assessment Methodology
Third Capital Requirements Directive (CRD3) and UK Financial Services Act 2010
IIF/Oliver Wyman Compensation Report
BCBS - Risk Metrics
CEBS - Final Guidelines
SECTION 5: SOURCES OF INFORMATION
Links to key publications
SECTION 6: GLOSSARY
Abbreviations used in the report
1: FSA Proportionality Tiers
2: FSA Code Principles and Proportionality Tiers
3: Disclosure requirements for Proportionality Tiers
1: FSA Remuneration Code
2: Amendments to the Prudential Sourcebook (BIPRU)
LIST OF BOXES
1.1: Timeline of events
2.1: FSA proposed supervisory approach
2.2: Examples of Code staff
LIST OF CHARTS
4.1: Global regulatory cascade