The FCA and Prudential Regulation Authority (PRA) have introduced a range of policy changes that aim to increase individual accountability within the banking sector.
We propose new measures to maintain firms’ focus on culture
To mark six months since the implementation of the Senior Managers and Certification Regime, we provide feedback on implementation so far and propose measures to further strengthen the regime.
The proposed rules will reinforce the importance of individual accountability at the most senior level of organisations.
Conduct Rule Breaches - Data Submission Update
The FCA notification of Conduct Rule breaches or 'Form H' (listed as REP008 in Gabriel) reporting window opened on 1 September 2016 and will close on 31 October 2016. You should use the form to report any breaches where disciplinary action has been taken or commenced, during the timeframe from 7 March 2016 to 31 August 2016.
Firms must submit annual data on breaches of our Conduct Rules by those staff to whom they apply (other than Senior Managers) using 'Form H' (REP0008 in Gabriel).
What do you need to do now?
It is mandatory for banks and building societies to submit Form H (REP008) via the Gabriel system, including nil returns.
For Credit Unions only: If there have been no breaches of conduct during the timeframe 7 March 2016 to 31 August 2016 where disciplinary action has been taken or commenced, you do not have to submit Form H. All other firms should submit by nil return.
Credit Unions are encouraged to submit Form H (REP008) via the Gabriel system, but can also submit by email or post.
You can email the form to BreachesofConductReporting@fca.org.uk or post to APPM, Authorisations Division, the Financial Conduct Authority, 25 North Colonnade. E14 5HS.
You can also access the paper form via the FCA handbook.
New rules on increasing individual accountability in the banking sector
The rules on individual accountability have been introduced following changes set out in the Banking Reform Act 2013, based on the Parliamentary Commission for Banking Standards’ recommendations to improve professional standards and culture within the UK banking industry.
The rules will make it easier for firms and regulators to be clear about who is responsible for what. Clear individual accountability should focus minds, drive up standards, and make firms easier to run and to supervise. And if things go wrong, it will allow senior managers to be held to account where they are at fault for misconduct that falls within their area of responsibility. It will also hold individuals working at all levels within relevant firms to appropriate standards of conduct.
Who it applies to
The rules apply to:
- building societies
- credit unions
- the largest investment banks that are regulated by the PRA
- branches of foreign banks operating in the UK
The key features of the new rules are:
Senior Managers Regime
The Senior Managers Regime (SMR) started on 7 March 2016. It focuses on the most senior individuals in firms who hold key roles or have overall responsibility for whole areas of relevant firms. Firms need to:
- ensure each Senior Manager has a Statement of Responsibilities setting out the areas for which they are personally accountable
- produce a Firm Responsibilities Map that knits these together
- ensure that all Senior Managers are pre-approved by the regulators before carrying out their roles
The Government also introduced a ‘duty of responsibility’, which means Senior Managers are required to take the steps that it is reasonable for a person in that position to take, to prevent a regulatory breach from occurring. This formed part of the Bank of England and Financial Services Act 2016.
This applies to ‘material risk-takers’ (these are staff who are subject to the Dual Regulated Firms Remuneration Code and other staff who pose a risk of significant harm to the firm or any of its customers (eg, staff who give investment or mortgage advice or who administer benchmarks). Firms need to have identified:
- all certified individuals by 7 March 2016
- assess them as fit and proper by 7 March 2017
- have procedures in place to re-assess the fitness and propriety of certified staff on an annual basis
The Financial Services Register now reflects Senior Managers & Certification Regime information for relevant firms.
These are high-level rules that apply directly to nearly all staff (apart from ancillary staff eg catering staff). Firms must ensure that staff who are subject to the rules are aware of them and how they apply to their jobs.
The Conduct Rules apply for Senior Managers and staff in the Certification Regime from March 2016, and apply to everyone else from March 2017.
The regime for branches
Our rules apply the same principles to branches of foreign banks, but tailor them to account for the different governance structures in branches (notably that the ultimate Board will likely reside overseas). For branches of European banks the rules also reflect the split of responsibilities between the FCA as the ‘Host state regulator’, and the European ‘Home state regulator’ as set out in EU law. The final rules for branches apply the certification and conduct rules to individuals where they are performing activities from the UK establishment.
We introduced a new Remuneration Code for banks, building societies and PRA-designated investment firms last year (SYSC 19D) in response to recommendations from the Parliamentary Commission on Banking Standards. Find out more about our Remuneration Codes.
New rules on strengthen whistleblowing systems and controls in firms and to promote a culture where people can speak up came into effect in September 2016. These rules apply to deposit-takers (meaning banks, building societies and credit unions) with assets over £250m, Solvency II insurers and PRA-designated investment firms.
Extension of the Regime to all FSMA authorised firms
The Bank of England and Financial Services Act 2016 includes the extension of the Senior Managers and Certification Regime (SM&CR) to all FSMA authorised firms. We are developing our approach to the extension of the SM&CR and our current plan is to consult during 2017. HM Treasury has stated their intention that the regime should start from 2018.
Final rules on whistleblowing in UK branches of overseas banks
Final rules on applying conduct rules to Non-Executive Directors
Final rules on how we will enforce the Duty of Responsibility
Finalised guidance on remuneration in CRD IV firms
|Individual accountability: timetable||Date|
Start date of Senior Managers and Certification Regime for the banking sector
7 March 2016
Application of Conduct Rules to banking sector staff who are not within the Senior Managers or Certification Regime
7 March 2017
Extension of Senior Managers and Certification Regime to all FSMA authorised firms