The strengthening accountability in banking exercise began with an investigation by the Parliamentary Commission on Banking Standards, following the financial crisis of 2008, and certain high-profile conduct failures in the UK banking industry. These included PPI mis-selling and the LIBOR rate-rigging scandal, followed by serious misconduct in relation to foreign exchange.
The overall aim of the exercise was to rebuild trust, to increase personal accountability, and to introduce industry-wide standards. Regulatory bodies, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), took forward practical implementation in respect of banks, building societies, credit unions and PRA-regulated investment firms. The exercise, which became the senior managers and certification regime (SM&CR) set out extensive new requirements:
- a largely revamped senior management regime,
- a new ‘certification’ regime for certain staff, and
- revised conduct rules.
The PRA and the FCA published ‘final’ rules in mid-2015 but, remarkably, the details are still not complete. This is because the PRA and the FCA have continued to make adjustments and modifications right up to mid-2017. Indeed, the FCA piggy-backed its late July 2017 consultation, on extending the SM&CR to other sectors, with yet more proposed minor modifications for deposit-takers. And we still await feedback on other matters, such as whether senior lawyers are to be included in the senior management regime.
The BSA has always strongly supported the overall exercise. It was imperative, after all the serious past failings, for the authorities to take decisive action. But, like all laws and regulations, the new regime will only be as good as its implementation and enforcement. In so many areas, we see laws and rules that signal change but turn out to have theoretical, rather than actual, impact. For instance, the UK’s equal pay laws are now 47 years old, yet inequality in pay is still apparently commonplace. There are many other examples.
We are pleased that the Government and the regulators listened to reasonable suggestions from the industry to change some of the provisions in order to render them more workable and fair in practice; for example, the requirement on firms to report conduct breaches that led to disciplinary sanctions against individual, rather than mere suspicions of breach.
However, now it is time to draw the line and get on with the practical work on a business-as-usual basis. The PRA and the FCA will want to review how successful this major exercise has been, but it is difficult to see how any thematic review can have meaning while the project is still work in progress.
Therefore, in the interests of the UK economy, consumers, firms and, indeed, regulators, we have called on the PRA and the FCA to draw a line by the end of 2017, and allow firms to proceed with the excellent new regime, on a business as usual basis, from the start of 2018.
Originally published for the BSA's monthly Newsbite newsletter.
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