The government has said it will consult on replacing the “failed” approved persons regime across financial services in favour of a ‘senior persons’ regime that was originally conceived solely for the banking sector and that includes new criminal sanctions for “reckless” conduct.
In its response to the Parliamentary Commission on Banking Standards report, the government today (8 July) backed proposals for a senior persons regime, which will replace the approved persons regime.
The new regime would include new criminal sanctions for reckless misconduct by senior bank staff and will “set expectations” for senior staff rather than simply acting as an “initial gateway”.
To ensure accountability under the new regime the government will also “reverse the burden of proof” so senior persons can be held accountable for breaking regulatory requirements unless they can show they took all reasonable steps to prevent the contravention happening.
While the banking standards committee had originally proposed implementing the regime just for banking at first, the government said “it would be simpler legislatively and operationally to apply any reforms to the framework for regulating individuals to the financial services industry as a whole”.
It said: “While the Commission’s recommendations relate to standards in the banking sector, they consider it plausible that the weaknesses of the Approved Persons Regime affect not just the banking sector but other parts of the financial services industry too.
“The government will therefore consider with the regulators whether to amend the relevant [Financial Services and Markets Act] provisions to allow for wider application of the proposed reforms.”
As part of the new regime, the time limit for launching disciplinary action against senior persons will also be extended and regulators will be given powers to make approvals of senior persons subject to conditions or time limits.
