FCA consultation on strengthening accountability

Executive summary

The BSA and the sector that we represent are firm supporters of the principles and objectives behind the new regulatory framework – lack of proper management accountability has contributed significantly to the problems and scandals that have damaged the reputation of UK financial services in recent years.

However we are concerned that, as currently proposed, the introduction of Conduct Rules with all affected individuals being subject to regulatory scrutiny of their day to day activities will not deliver the FCA’s desired objectives. It is at odds with the FCA’s own principles of supervision and will in our view lead to unintended consequences for consumers.

Senior Manager & Certification regimes

We are broadly content with the approach that the FCA has taken with the Senior Manager’s Regime proposals.

In respect of the Certification Regime, we agree with the FCA’s approach of identifying roles within a firm which are not “material risk takers” but which could cause consumer detriment when not conducted properly – though we would be grateful for clarification on how certification should be proportionately applied to management & supervision roles.

But we are concerned that certification will unbalance the playing field for recruitment / retention of mortgage advisers / financial advisers with unintended consequences for RDR and MMR.  The financial services trade press is already pointing out the recruitment opportunities for IFAs, estate agents and mortgage intermediaries who can offer mortgage and financial advisers the same jobs but without the burden of certification. 

Conduct Rules

While we do strongly support the objectives behind the FCA’s proposed Conduct Rules in respect of creating a common understanding of what is acceptable and unacceptable behaviour at all levels of a firm, we don’t believe that that the FCA’s proposed approach is going to achieve this.

Our opinion is that the proposed approach of subjecting affected employees to regulatory scrutiny of their adherence to the Rules individually is disproportionate to the FCA’s commitment to systemic regulation and too focussed on driving change through fear of reprisal - and so is unlikely to deliver the cultural change in some firms that the FCA wants. We also see a risk that this could generate (unintended) employee behaviours that lead to a service culture based on avoiding breaching Conduct Rules rather than the customer’s best interests.

Our strong preference would be for the Conduct Rules to be applied as “standards” with individual employees accountable for their conduct through internal appraisal / disciplinary procedures but with the firm / senior management accountable to the FCA for embedding the Rules within the firm, allowing the FCA to focus on systemic problems. We believe that this approach would be more likely to deliver the desired objectives and fits best with the FCA’s commitment to systemic regulation.

Other points

We have some questions for the FCA on areas where the consultation needs further detail – particularly the reporting of suspicions of a breach of Conduct Rules.

BSA members’ estimates of implementation costs are higher than those highlighted in the FCA’s cost benefit analysis and particularly hard hitting for smaller building societies which will have some tough decisions to make on future spending in other areas. 

We have consulted with our members on the proposed implementation timetable and their feedback is that this is realistic for firms with deep resource pools though our smaller members believe a 24 month implementation time scale to be more realistic for them given the level of resources at their disposal.

BSA members have asked that the FCA and PRA help firms meet the proposed timescales by minimising the burden of new regulation during this period.


Click here to read the full response.

Members and associates should click here to read the policy brief on the proposals.