The global regulatory body known as the Financial Stability Board plans to set up a complaints facility designed to keep banks from overstepping the FSB’s latest pay and bonus rules and to encourage them to oversee one another across boarders.
Bankers believing that rivals in other nations are violating pay and bonus restrictions will be able to complain to the FSB, the Financial Times reports, quoting new FSB Chairman Mark Carney, who is also governor of the Bank of Canada.
Where bankers in one country complain about bankers in another, the FSB will track the complaints and regulators from those two countries will investigate, Carney said. Regulators from the two countries involved will investigate such allegations, and the FSB will track the complaints to see if they are clustered around particular countries, institutions or pay practices, he added.
“There will always be a specific situation that arises where institution X says institution Y took my team,” the FT quoted Carney saying after the FSB’s Basel meeting. “We will get up a bilateral mechanism to handle those complaints,” Carney said.
Generally speaking, rules reached by the G-20 require banks to limit the amount of guaranteed cash that bankers can receive, to defer large bonuses over several years and to tie the ultimate pay-out to risk and long-term performance.
But thus far the U.S, Australia, Canada, Hong Kong and Japan allow banks more flexibility than the UK and other EU countries when implementing international bonus rules.
“Germany, France and the UK are among countries, in addition to Singapore, that have set four FSB recommendations—such as rules on deferring bonus pay or defining the mix of cash and equities used in awards—as minimum requirements, according to an FSB analysis late last year. Authorities in the U.S., Japan, Hong Kong, Canada and Australia allowed firms greater flexibility, “taking account of differences in their business models and risk profiles,” the FSB stated.
The regulatory body continues to debate whether the rules for nationally important banks should be uniform across borders or whether each country will be allowed to set its own requirements, Carney said last week.
Next on the FSB’s agenda: Shadow banking. “These market-based sources of credit, which include corporate bond sales and direct lending by hedge funds, are now half the size of the traditional banking sector and growing still, even as many banks scale back their lending,” the FT reported, adding that Carney wants to expand his regulatory net to include such "shadow" participants.