Europe: financial regulation reform

The European Commission has published a table setting out the progress made in implementating the G20 commitments on financial regulation reform: see here (pdf). The table reports that the Commission's forthcoming financial institution corporate governance green paper will not, as expected, be published this month but will instead be published in June.

Further background information, with explanations for some of the abbreviations in the table, is available in the accompanying presentation: see here (pdf).

The G20 finance ministers framework on governance and compensation

Last Saturday the G20 Finance Ministers and Central Bank Governors issued a communiqué and banking statement. In the statement the finance ministers identified several actions including the following:

Clear and identifiable progress in 2009 on delivering the following framework on corporate governance and compensation practices. This will prevent excessive short-term risk taking and mitigate systemic risk, on a globally consistent basis building on and strengthening the application of the FSB principles:

• greater disclosure and transparency of the level and structure of remuneration for those whose actions have a material impact on risk taking;
• global standards on pay structure, including on deferral, effective clawback, the relationship between fixed and variable remuneration, and guaranteed bonuses, to ensure compensation practices are aligned with long-term value creation and financial stability; and
• corporate governance reforms to ensure appropriate board oversight of compensation and risk, including greater independence and accountability of board compensation committees.
  

We call on the FSB to report to the Pittsburgh Summit with detailed specific proposals for developing this framework, which could be incorporated into supervisory measures, and closely monitoring its delivery. We also ask the FSB to explore possible approaches for limiting total variable remuneration in relation to risk and long-term performance. G20 governments will also explore ways to address non-adherence with the FSB principles".