CP15/9: Strengthening accountability in banking: a new regulatory framework for individuals

Published: 16/03/2015     Last Modified: 14/09/2015

In July 2014 we consulted, jointly with the PRA, on a new regulatory framework for individuals working in banking. We are now providing feedback on the responses received to the consultation and setting out our policy intentions as a result. We are also consulting on guidance on the presumption of responsibility that applies to senior managers under the Financial Services (Banking Reform) Act 2013.

Our new regime is designed to encourage individual accountability for decision-making in banks, building societies, credit unions and PRA-designated investment firms. HM Treasury has now announced that the new regime will need to come into force by 7 March 2016 and we plan to publish our final rules in the spring/summer this year.  To give firms as much time as possible to prepare for the changes, this paper provides a set of near-final rules on our new Senior Managers’ Regime, together with a steer on our policy intentions for our Certification Regime and the application of our Conduct Rules.

We are also consulting on further, more detailed guidance on the presumption of responsibility, which was introduced by the Financial Services (Banking Reform) Act 2013.

Consultation Paper CP15/9 [PDF]

Who does this affect?

This paper will be of primary interest to UK banks, building societies, credit unions and PRA-designated investment firms (collectively referred to in the paper as ‘relevant firms’). This paper will also be relevant to UK branches of foreign banks. The proposals will affect a large number of individuals within the relevant firms, including, but not limited to, all their existing approved persons.

What is the background to this?

The behaviour and culture within banks played a major role in the 2008-09 financial crisis, in conduct scandals such as Payment Protection Insurance mis-selling, the attempted manipulation of LIBOR and failings in regard to the spot foreign exchange market. Under the statutory and regulatory framework in place at the time, individual accountability was often unclear or confused, undermining public trust in both the banking system and in the regulatory response.  

Following recommendations made by the Parliamentary Commission on Banking Standards, amendments were made to the Financial Services and Markets Act 2000 through the Financial Services (Banking Reform) Act 2013. As a result, we consulted on the introduction of a new regime for individual accountability.

What other publications are relevant?

Alongside this paper, we are issuing a separate consultation, jointly with the PRA, on the accountability regime for foreign firms with UK branches. The policy decisions and near-final rules contained in this paper must also be read in conjunction with feedback and rules from the PRA once published later this month.

What are the next steps?

We are consulting on new guidance on the circumstances in which we would seek to apply the presumption of responsibility under the Financial Services (Banking Reform) Act 2013, how we would apply it, and the steps that a Senior Manager should take in order to rebut the presumption. We would welcome comments using our online response form by 16 June 2015.

We will also publish a Policy Statement with final rules on our new accountability regime in the spring/summer this year.

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