Super-regulator launches second bonus review

The Financial Stability Board (FSB) has launched its second probe into bonus culture and invited financial service providers to submit their views.

The latest review is to assess how well the FSB's rules governing bonuses and other staff compensation have been taken on board by individual countries and institutions.

In particular, the FSB wants firms, regulators and trade associations to alert it to gaps in regulation, challenges firms face in implementing its rules, and the evolution of market practices in compensation.

All large financial institutions and national regulators, including the FSA, must comply with the international FSB's Principles for Sound Compensation Practices.

Under the Principles, financial institutions must have effective governance of compensation, alignment of compensation with prudent risk taking, and supervisory oversight and engagement by stakeholders.

Regulators and major firms will be asked their views before the review closes on 15 June 2011. A report on the FSB's findings is due in the autumn.

This latest probe into compensation practices follows the FSB's review in March 2010, which found "effective implementation [of the principles] was far from complete" and drew attention to areas needing improvement, such as increased coverage of non-bank institutions.