UK FCA issues rules for greater accountability in banking


By Samantha White

UK regulators the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have confirmed their approach to improving the accountability of individuals at all levels in the banking sector.

The publication is further to rules that were set out in June on variable remuneration, including bonuses, in banks, building societies, and PRA-designated investment firms. The document also provides advice for firms on preparing for the new regime, which comes into force next March.

Martin Wheatley, chief executive of the FCA, said in a news release that the rules would embed personal accountability and improve standards across the industry.

Under the rules, individuals at all levels of the banking profession can be held accountable for their actions. 

The Senior Managers Regime ensures that executives can be held accountable for any misconduct that falls within their area of responsibility. Firms should now allocate and map out responsibilities and prepare statements of responsibilities for those holding such posts.

In addition to existing requirements for individuals in these roles to be approved by regulators, there is now a legal requirement for firms to implement procedures to assess the fitness and propriety of such individuals, both prior to applying for regulatory approval and at least once a year after that.

Any other staff who could potentially cause significant harm to the firm or its clients are subject to the Certification Regime, and procedures for assessing the fitness and propriety of these employees are also required, with review at least annually. This includes employees who provide investment advice or submit to benchmarks, for example.

The standard of behaviour expected of banking sector professionals is set out in the Conduct Rules, which will apply to those covered by the Senior Manager Regime and the Certification Regime from March 7th 2016. The rules will begin to apply to other staff one year later.

The FCA has also launched a consultation on the extension of the Certification Regime to individuals involved in wholesale market activities, such as trading. 

Samantha White (swhite@aicpa.org) is a CGMA Magazine senior editor.