2018年-FSB全球金融稳定委员会_FSB_Workshop_on_the_Link_between_Compensation_and_Conduct_Data_collection_and_analysis_10页_331kb

FSB Workshop Summary: Link Between Compensation and Conduct

Core Content

The FSB hosted a workshop on 7 December 2017 to explore the relationship between compensation practices and misconduct risk, focusing on data collection, analysis, and supervisory reporting. The event aimed to enhance understanding of how firms use compensation tools within broader performance management frameworks to monitor and mitigate misconduct risk. The summary reflects the insights from attendees, including senior executives from 14 large international banks and officials from the FSB Compensation Monitoring Contact Group (CMCG), and is conducted under the Chatham House rule.

Main Points and Key Takeaways

1. Monitoring and Data Collection

• Focus on Conduct: Banks are increasingly collecting data on employee behavior, not just financial performance, to link compensation with conduct.
• Data Integrity: Ensuring the integrity, completeness, and accuracy of data is crucial for making fair compensation decisions.
• Challenges: Legacy systems, integration of data streams, and differences in employment law across jurisdictions are major obstacles.
• Holistic Approach: A consistent, holistic approach to incentivizing appropriate behavior and deterring misconduct is necessary.
• Multi-Year Tracking: Banks are implementing multi-year tracking of conduct and performance to assess long-term impacts.
• Role of HR and Control Functions: HR, legal, audit, and compliance functions are central to data collection and analysis, while business lines are becoming more involved.
• End-to-End Systems: There is a growing need for end-to-end conduct systems to integrate and analyze data effectively.
• Legal and Privacy Concerns: Data protection and privacy regulations, along with legal privilege issues, pose challenges in data collection and use.
• Positive Incentives: Firms are emphasizing positive conduct recognition over punitive measures, using "good conduct" programs and role models.

2. Data Analysis

• Advanced Analytics: Banks are leveraging advanced analytics, robotics, and AI to detect misconduct patterns and predict risks.
• Behavioral Data: Granular data such as training records, trading behavior, and limit breaches are used to identify potential misconduct.
• Predictive Analytics: While predictive analytics is gaining traction, its results are still limited. It is used to screen candidates and analyze past conduct to identify risk factors.
• Intelligence Capability: The three lines of defense (business, risk, and compliance) are improving their intelligence capabilities through data-driven insights.
• Back-Testing: Banks recognize the need for back-testing policies to assess their long-term impact, but this remains a challenge due to the lack of quantitative metrics.
• Narrative Data: Supervisors require qualitative and narrative data to fully understand misconduct events and compensation adjustments.
• Behavioral Metrics: Behavioral ratings and performance modifiers are increasingly used to adjust variable pay, linking behavior with financial outcomes.

3. Supervisory Reporting

• Systematisation Challenges: Supervisory reporting is often case-specific and difficult to aggregate, requiring a common vocabulary for misconduct risk.
• Reporting Approaches: Different regulatory bodies have varying reporting requirements, with some demanding upfront data and others conducting thematic reviews.
• Role of Supervisors: Supervisors play a critical role in identifying systemic issues and behaviors that span multiple firms or departments.
• Open Dialogue: Transparent communication with supervisors is essential for assessing the alignment between risk and compensation decisions.
• Taxonomy Needs: A clear, common definition of "risk adjustment events" is needed to align data reporting and supervisory expectations.
• Internal vs. External Reporting: Firms use internal data for decision-making and adjust their reporting based on supervisor feedback.

Key Information

• Objective: To improve understanding of how compensation practices influence misconduct risk and to support more robust frameworks for managing it.
• Participation: Senior executives from 14 large international banks and FSB officials.
• Feedback Request: The FSB invites feedback on the workshop topics, to be sent by 6 July 2018.
• Trends: Banks are moving towards more data-driven, behavior-focused compensation systems, with a growing emphasis on non-financial metrics.
• Challenges: Data integration, legal privacy concerns, and the need for a common taxonomy of misconduct events remain key obstacles.
• Future Direction: The next phase involves integrating consequence management frameworks and building a comprehensive history of conduct data for better risk identification and remediation.

Conclusion

The workshop highlighted the evolving role of compensation in managing misconduct risk, with a focus on data-driven decision-making and improved oversight. While progress has been made in analytical capabilities and governance, challenges remain in data integration, legal compliance, and defining a consistent framework for misconduct reporting. The FSB encourages continued dialogue and collaboration to address these issues and enhance the effectiveness of compensation practices in promoting ethical behavior.