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TCH Files Comment Letter with FSB on Its Compensation Practices Consultation

The Clearing House (TCH) submitted a response to the FSB’s consultation entitled Supplementary Guidance to the Principles and Standards on Sound Compensation Practices, which is intended to provide firms and supervisors with a framework to consider how compensation practices and tools, such as in-year bonus adjustments, malus and clawback, can be used to reduce misconduct risk and address misconduct incidents at significant financial institutions. 

In the comment letter, TCH asserts that the proposal’s approach to addressing misconduct is unduly and unnecessarily specific and prescriptive and fails to provide appropriate latitude for significant differences in labor, compensation, and governance practices and norms across different jurisdictions.  TCH recommends that if the FSB proceeds with issuing internationally endorsed guidelines in this area, it should issue a revised consultation that recognizes the successful implementation of various public sector compensation frameworks, avoids the introduction of any new, specific standards, and provides bank boards and management with appropriate flexibility to maintain dynamic compensation practices that evolve over time to keep pace with legal, market, and risk-management developments.