Peer review and compliance

Peer reviews and compliance

Issues

This work stream of the FSB covers four overlapping areas that might be relevant to LICs. The first includes thematic and country Peer Reviews (the former aiming to encourage consistent implementation of regulatory or supervisory measures, and the latter on assessing progress in implementing IMF / World Bank Financial Sector Assessment Program (FSAP) recommendations).

The second area relates to the reform compensation practices to support financial stability. G20 considers this an outstanding issue (although especially for advanced rather than emerging economies), where excessive compensation encourages excessive risk taking. FSB has published principles and is implementing a related peer review.

The third area is the Co-operation and Information Exchange Initiative, which intended to determine by Spring 2011 the jurisdictions not cooperating fully with the evaluation process as well as those that show insufficient progress to address weak compliance with internationally agreed information exchange and cooperation standards. If this relates to its outreach to non-cooperative jurisdictions, then this would potentially be relevant to LICs.

The fourth area is the FSB Compendium of Standards accepted by the international community as important for sound financial systems, which would be relevant to LICs if there will be pressure on them (e.g. via Peer Review and the Non-Cooperative Jurisdictions initiatives) to comply.

Progress and next steps (as of April 2011)

Thematic and country peer reviews

· FSB completed country peer reviews for Italy and Spain. Australia is in progress. Canada and Switzerland will be launched in S2 2011

· FSB completed thematic peer reviews on residential mortgage underwriting and origination practices, and on risk disclosure practices (March 2011)

Reforming compensation practices

· FSB launched its second thematic peer review to assess progress in implementing FSB Principles for Sound Compensation Practices and their Implementation Standards, to be published by the time of the G20 Summit

Cooperation and Information Exchange Initiative

· At their February 2011 meeting, G20 Finance Ministers and Central Bank Governors looked forward to the publication of a public list of all jurisdictions evaluated by the FSB ahead of the next G20 Leaders Summit

· At its April Plenary meeting, the FSB reviewed the status of evaluations underway and agreed on the next steps in the initiative, including to meet the calls by the G20

· FSB was to publish later in April a brief report summarising the progress of the initiative to date and the next steps

Compendium of Standards

· A Working Group was formed to undertake a comprehensive update of the Compendium, and its work will be completed later in 2011

· FSB will conduct a peer review against the Core Principles for Effective Deposit Insurance Systems by the BCBS and IADI later in 2011

· FSB will continue to be periodically review and update the compendium in light of policy developments at the international level

Key contacts

· Start with the FSB Standing Committee on Standards Implementation (SCSI)

References

Thematic Peer Reviews

The following reports were prepared by the Standing Committee on Standards Implementation. Information about this Standing Committee and the teams responsible for preparing each report can be found here.

· (Mar 2011) FSB Thematic Peer Review on Risk Disclosure Practices

· (Mar 2011) FSB Thematic Peer Review on Mortgage Underwriting and Origination Practices

· (Mar 2010) FSB Thematic Peer Review on Compensation

· (Mar 2010) Oliver Wyman Report: Banking compensation reform – Summary report of progress and challenges commissioned by the FSB

· (Jan 2010) FSB Thematic Review on Compensation - Review Template

· (Sept 2009) FSB Principles for Sound Compensation Practices - Implementation Standards

Country Peer Reviews

· (Jan 2011) FSB Country Peer Review of Spain http://www.financialstabilityboard.org/publications/r_110207a.pdf

· (Jan 2011) FSB Country Peer Review of Italy

· (Sept 2010) FSB Country Peer Review of Mexico

Cooperation and Information Exchange Initiative

· (Apr 2011) Progress report: Promoting global adherence to regulatory and supervisory standards on international cooperation and information exchange