The Financial Stability Board (FSB) has published its latest progress report on reducing misconduct risks in the financial sector.
The report provides an overview of the measures taken by the FSB and other international bodies in addressing misconduct issues, as well as further steps that are planned to reduce misconduct risk and thereby strengthen trust in the financial system.
The report is set out under five headings:
- measures to strengthen financial institution governance;
- actions directed at authorities’ capacity to address misconduct risk;
- actions directed at improving market structures and practices;
- actions to enhance the robustness of market structures; and
- actions to enhance conduct standards and adherence in markets.
In terms of future developments, the FSB highlights the following initiatives:
- improving monitoring and report on the use of compensation tools. The FSB intends to develop recommendations by the end of 2017 for consistent national reporting and data collection by national supervisors on the use of compensation tools to address misconduct risk in significant financial institutions. These recommendations may address the frequency with which supervisors should collect such data, the reasons for the use of a compensation tool and the variable compensation affected by a compensation tool;
- reforming major interest rate benchmark setting to reduce manipulation risk. The FSB intends to publish by October 2017 a progress report on reforms to interest rate benchmark setting. The report will consider issues including the identification of an transition to alternative near-risk free rates and the robustness of derivative contracts to the risks of interest rate benchmark discontinuation; and
- selection of benchmarks and contingency planning. The International Organization of Securities Commission (IOSCO) has approved the preparation of a public statement putting forward matters for users of financial benchmarks to consider when selecting benchmarks and for contingency planning. IOSCO expects to publish the statement following FSB’s October 2017 progress report on reforms to interest rate benchmark setting
View FSB progress report on reducing misconduct risks in financial sector, 4 July 2017