Senior executives in the U.K. banking and insurance sectors are facing new accountability standards under new regulatory regimes that came into effect on Monday.
The new regimes will hold individuals working at financial firms to new standards of conduct. They also aim to ensure that senior managers are held responsible for misconduct that happens on their watch. U.K. regulators, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), have adopted rules to implement the recommendations of that report.
“Today marks the beginning of a new era of increased individual accountability. The ‘senior managers’ regime is not designed to re-invent the way that firms organize themselves but to reflect and ensure clarity about how this operates in practice,” says Tracey McDermott, acting chief executive at the FCA, in a statement. “We are determined to embed a culture of personal responsibility within the banking sector.”
“Appropriate and robust accountability for senior managers in financial institutions is a crucial part of the effective functioning of the economy,” adds Andrew Bailey, deputy governor, prudential regulation, at the Bank of England and CEO of the PRA.
“At the heart of the new accountability regime, which comes into force today, is one very simple principle — you can delegate tasks but you cannot delegate responsibility. This means that senior managers at banks and insurers should know what they are responsible for and can be held accountable for failings in their area. This is a crucial milestone in our drive for greater accountability in financial services,” said Bailey.
The effort to enhance industry accountability follows a series of recommendations from a Parliamentary Commission report calling for action to improve professional standards and culture in the U.K. banking industry. The regulators will also apply the same principles to their own senior staff internally.
“We hold ourselves to the highest professional standards and so we have decided to apply the fundamental principles of the regime to our senior staff,” McDermott says. “By building on our existing framework of accountability, we will further bolster the transparency with which we are run, and reinforce the standards to which we hold ourselves.”