FCA looks to beef up accountability

The Financial Conduct Authority is doubling down on personal accountability as it marks six months since the implementation of the Senior Managers Regime, and said in a statement on September 28 that the proposed rules “will reinforce the importance of individual accountability at the most senior level of organisations.”

The Senior Managers Regime, which came into force in March, is run by the FCA and its sister organisation the Prudential Regulation Authority and is the product of more than two years of labyrinthine regulatory and political attempts to improve standards and culture.

It aims to pinpoint personal responsibility for conduct within a firm on top executives following a litany of damaging scandals.

Among the proposed measures the FCA will consult on: Extending the current conduct rules to all non-executive directors of banks and insurers; changes to the enforcement action the FCA can take against senior managers if a team breaks a regulatory requirement under their watch; and looking at how executives heading up legal function in firms should be covered under the senior managers regime.

The FCA said that firms have “generally” taken their responsibilities seriously, although the regulator noted that in some cases it has seen evidence of overlapping or unclear allocation of responsibilities. It also said that in some cases firms appear to be sharing responsibilities among junior staff, “obscuring who is genuinely responsible.”

The FCA reiterated that the rules will expand to cover all regulated financial firms, including asset managers and hedge funds, from 2018.

Andrew Bailey, chief executive of the FCA, said: “Generally, we have observed that firms are taking their responsibilities seriously and have broadly got the regime right. But we recognise culture change takes time and there is still more to do.”

Writing in the Guardian newspaper on September 28, Bailey denied that the FCA has gone soft on culture after it dropped a high-profile review into banking culture last year. “I have been chief executive of the FCA for three months and I can tell you that nothing could be further from the truth. Culture matters a great deal,” he said.

• This article also appeared on WSJ City, a made-for-mobile app that combines the best of the Wall Street Journal and Financial News, tailored for an audience in the City of London. Download here

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