The new certification and the senior managers regime are better than the discredited approved persons regime, Treasury Select Committee chairman Andrew Tyrie said, stating that a robust form of continuous scrutiny targeted on the most senior key people in banks is needed.
Earlier today (7 July), the Financial Conduct Authority and Prudential Regulation Authority published new rules designed to strengthen individual accountability in banking, which revealed that it is still considering whether to make wider changes to the approved persons regime.
The FCA said feedback to the consultation paper warned the certification regime may cause a two-tier system between those financial advisers who are subject to the new regime, because they are employed by banks, and those who remain subject to the ‘approved persons regime’ because they work for financial advisers.
The rules also stated that while bank’s investment advisers will not need to be pre-approved by regulators, the big high street names must put in place procedures for assessing for themselves the fitness and propriety of staff, for which they will be accountable to the FCA and PRA.
Mr Tyrie said it was regrettable that it took the Forex scandal to demonstrate the crucial role the regime can and should play.
“Taken together, and sensibly implemented, certification and the senior managers regime should reduce the regulatory burden compared to the discredited approved persons regime, not increase it.”
However, he added that it is essential therefore that the regulators exercise judgement. “They need to avoid recreating the bureaucratic, box-ticking, back-covering approach that characterised the discredited approved persons regime.”
The Parliamentary Commission on Banking Standards that Mr Tyrie led concluded that the approved persons regime was “a complex and confused mess”, which “served as little more than an initial gateway into the industry with no subsequent meaningful oversight”.
He noted that while the government and regulators have taken significant steps towards implementing the commission’s recommendations on senior individuals in banking, proposals initially put forward by the regulators in July 2014 on the senior managers regime – particularly the FCA – would have diluted its effectiveness by extending its scope well beyond the commission’s recommendations.
“What is needed is a robust form of continuous scrutiny targeted on the most senior key people in banks, not another box-ticking exercise,” commented Mr Tyrie.
Meanwhile, Michael Ruck, a senior financial services enforcement lawyer at Pinsent Masons and formerly with the Financial Conduct Authority, said that only time will tell if the new regime meets the regulators’ twin objective of improving the culture and standards within the banking industry whilst making it simpler for the regulator to take action against senior managers when a failing is identified.
“This is the next step in the credible deterrence agenda, with regulators and prosecutors seeking to use Statements of Responsibility and attestations to take action against individuals reflecting their statements on this issue over the past few years.
“This regime adds another pressure to those banks and senior managers who not only have the banking levy to deal with but also the ever increasing cost of compliance.”
peter.walker@ft.com
