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9th March 2016

Individual Accountability Regime Begins

Regulatory News: New Accountability Regime Begins! Senior Managers Regime, Certification Regime and Conduct Rules now come into play for Banks...

From the start of this week, Monday 7th March 2016, the new accountability rules come into force for the banking sector, including banks, building societies and certain investment firms that are regulated by both the FCA and PRA.

As discussed previously, there are three main aspects of these new rules:

• Senior Managers Regime;
• Certification Regime; and
• Conduct Rules

Senior Managers could now face jail

The new regimes will now ensure that senior managers are held accountable for any misconduct that occurs under their area of responsibility and will also hold individuals working at all levels within relevant firms to appropriate standards of conduct.

The new regimes will now ensure that senior managers are held accountable for any misconduct that occurs under their area of responsibility and will also hold individuals working at all levels within relevant firms to appropriate standards of conduct. As, the soon-to-be Chief Executive of the FCA, Andrew Bailey plainly said, whilst tasks within firms can be delegated, responsibility cannot.

HM treasury advised this now means that “senior managers in UK banks could face 7 years in jail or an unlimited fine if their actions cause their institution to fail.”

Commenting on the new criminal offence, the Chancellor of the Exchequer, George Osborne, said, that the having learnt the lessons from the past, “It is absolutely right that a senior manager whose actions causes their bank to fail should face jail.”

Criminal Offences under the new regime:

Criminal offences for Senior Managers under the new rules will include:

• If he/she agrees to the taking of a decision which causes the institution to fail
• If, at the time of making the decision, he/she was aware of the risk that the decision could cause the institution to fail; and
• If his/her conduct in relation to the decision fell far below that which could reasonably be expected of a senior manager in that position.

The introduction of the Senior Managers and Certification Regimes (SM&CR) will also shift the responsibility for ensuring members of staff that are below senior management are ‘fit and proper’ for the roles they undertake, despite not requiring regulatory approval, however there will be more flexibility that will enable regulators to impose higher standards of conduct on a wider range of staff in these firms.

New Accountability Regime Begins

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.