Previously the Parliamentary Commission on Banking Standards (PCBS) recommended that UK regulators be given additional powers to address the ‘failure of standards at the most senior levels of a bank’. In response the FCA, PRA and HM Treasury argued that regulators were able to address these failings by applying existing powers appropriately.
The FCA has now published a statement of policy that:
- sets out how it can meet the PCBS’ recommendations within its supervisory model;
- describes how it addresses standards, governance and culture as part of regular supervision;
- describes a new approach, known as “Enhanced Supervision”, when fundamental failings of standards, governance and culture are identified; and
- explains how it and the PRA work together to ensure that systemic weaknesses within firms are identified and addressed effectively and efficiently.
The FCA explains that firms will be made formally subject to enhanced supervision where it believes that they present serious risks to its objectives, due to a serious failure of culture, governance or standards, and it does not believe that its usual supervisory approach will be sufficient to tackle those issues in a timely way. The statement lists some indicators of the kind of failings that would lead to enhanced supervision, including a poorly functioning board and evidence of risk, compliance and audit being poorly managed. Firms in this status will be regularly reviewed by the FCA and a plan put in place to rectify matters. Progress against the plan will be monitored and corrective action will be taken if it is not on course to deliver a successful outcome.
In the statement the FCA also mentions that it will consult on the new Senior Managers and Certified Persons regime this summer.
View Tackling serious failings in firms: a response to the special measures proposal of the Parliamentary Commission on Banking Standards, 19 June 2014
