British regulators have announced new policies designed to help implement its new regime for individual accountability in the banking business; along with proposed guidance on improving the industry’s culture.
The UK’s Financial Conduct Authority (FCA) Monday published policies that set out how it will implement a new accountability regime for senior managers in the bank sector. That regime aims to clearly allocate responsibilities to key decision-makers and strengthen their individual accountability; it also strengthens powers of approval and enforcement for the regulators.
The new policies also details the FCA’s plans for a certification regime and new conduct rules, which will require firms to assess and certify the fitness of employees deemed capable of causing significant harm to the firm, its customers, or the integrity of financial markets. The FCA says that the policies announced Monday are significant and will make it easier for firms and regulators to hold individuals to account.
Additionally, the FCA is also consulting on more detailed guidance on how it will apply the new regime; and, it published a separate consultation, along with the Prudential Regulation Authority (PRA), on the accountability regime for incoming branches of foreign banks. The proposed guidance sets out the circumstances in which the FCA would seek to apply the new presumption of responsibility; how it would be applied; and, the steps that a senior manager can take in order to rebut that presumption.
“How a firm conducts its business and treats its customers must be at the heart of how it operates and this has to start at the top. Today’s policy measures are an important step in ensuring that regulators have the tools at their disposal to hold individuals to account and they build on the cultural change we are beginning to see in the boardrooms of firms across the country,” said Martin Wheatley, CEO of the FCA.
The new efforts to ensure greater accountability in the banking sector follows a Parliamentary commission, which set out recommendations for legislative and other action to improve professional standards and culture in the UK banking industry.
The FCA also published a consultation on guidance to help firms manage the risk of mis-selling from performance management processes and incentive structures. “The culture of a firm is important in ensuring customers are at the heart of how a business is run. A key driver of culture is how people are rewarded and the behaviours that are valued and recognised by the firm,” it says. “They way in which staff are incentivised and their performance is managed plays a key role in this.”
The FCA says that it expects all firms who deal with retail consumers to read the report and take action to ensure they are managing this risk.