To safeguard financial stability, compensation schemes in the financial sector must be better aligned with the long-term performance of firms and with prudent risk-taking. International guidelines to this effect have been developed by the Financial Stability Board. To date, the implementation of these guidelines is still seeing good progress. But much work still lies ahead for national authorities and banks.
They have to ensure effective implementation of sound compensation policies that lead to more prudent risk-taking behaviour of employees. The strong compensation requirements that Europe has set in the legislative package on capital requirements are an important step in this direction. But achieving lasting change in behaviour and culture will take time and stamina.