In July 2014, the FCA and PRA published a joint consultation paper that aimed to improve individual responsibility and accountability in the banking sector. The proposals were designed to create a new approval regime for the most senior individuals whose behaviour and decisions have the potential to cause a bank to fail or to cause serious harm to customers.
The FCA has now published Consultation Paper 15/9: Strengthening accountability in banking: a new regulatory framework for individuals – Feedback on FCA CP14/13 / PRA CP14/14 and consultation on additional guidance (CP15/9).
In CP15/9 the PRA and FCA set out near-final rules on the new senior managers regime, together with a steer on their policy intentions for the whole regime, including the certification regime and the application of the new conduct rules.
Whilst the regulators are not proposing significant changes to the scope of the new regime they are making certain adjustments based on feedback to the earlier consultation. This includes:
- firms will be required to allocate a financial crime responsibility to an approved senior manager. This individual may also be the money laundering reporting officer, but does not have to be;
- the FCA introduces a list of prescribed responsibilities for senior managers. This list is aligned with the PRA’s list of prescribed responsibilities;
- in addition to introducing a prescribed responsibility for financial crime the FCA introduces two new prescribed responsibilities. The first covers developing and overseeing a firm’s remuneration policies and practice. The second is in relation to overall responsibility for a firm’s compliance with the Client Assets sourcebook, where these requirements are relevant;
- the FCA will not be setting a threshold for what might constitute a significant change that would trigger a revised Statement of Responsibilities submission. However, it does set out some examples of potential significant changes;
- the requirement for an annual confirmation that there are no gaps in the allocation of senior management responsibilities has been dropped. The FCA will instead rely on Principle 11 and expects firms to make contact without delay about any material gaps or changes; and
- the FCA recognises that there may be cases where it will be impractical to ask a predecessor senior manager to prepare a handover certificate and has added guidance to make this clearer.
In CP15/9 the FCA is also consulting on further, more detailed guidance on the presumption of responsibility. The presumption of responsibility is in relation to the potential accountability of senior managers in the event that a firm contravenes a requirement in an area that the senior manager is responsible for. The senior manager could be held accountable if they are unable to satisfy the regulators that they have taken ‘reasonable steps’ to prevent or stop the contravention.
The deadline for comments to CP15/9 is 16 June 2015.
The FCA is expected to publish a Policy Statement containing final rules this spring/summer. The final rules will then come into force on 7 March 2016. All relevant firms will have until 8 February 2016 to notify the PRA and FCA of the names of the persons who are approved as senior managers.