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Putting individual accountability at the heart of banking PDF Print E-mail
Friday, 08 January 2016

In the wake of the banking crisis and the recent LIBOR and FX scandals, the political, regulatory and public clamour for senior individual accountability has reached fever pitch. Much criticism has been directed at the regulator’s perceived failure to bring to account those individuals considered to have been ultimately responsible for serious transgressions within financial institutions.

Written by David Berman, Head of Financial Services Regulation at Macfarlanes LLP

In response, the government and regulator introduced the Senior Managers Regime (SMR). In large part, the SMR is designed to facilitate senior individual enforcement actions and overcome the (often insurmountable) evidential hurdles that have frustrated the regulator in the past.

Somewhat ominously (if not at all unsurprisingly), the latest FCA Business Plan set out the regulatory stall in relation to the ‘hot’ topic of senior individual accountability:

“The accountability of individuals in positions of responsibility needs to be improved and overall standards of governance raised. The new Senior Managers Regime will make it easier for both firms and regulators to hold individuals to account”.

The SMR supplements other (continuing) regulatory initiatives similarly intended to facilitate the regulator’s pursuit of senior level individuals – namely, a marked increase in regulatory attestation requests and the new-found phenomenon of culture-based enforcement (‘cultural attribution’). Both of these latter topics will be covered in subsequent blogs.

Senior level individuals within UK-regulated financial institutions are therefore now (and will likely remain) firmly under the regulatory spotlight, facing an unprecedented threat of adverse scrutiny.

Understanding and managing the risks
It is therefore vital that designated senior managers understand the most likely sources of personal regulatory exposure and address how these risks can be effectively managed down to acceptable levels in practice. For example, by considering such questions as:

What does the regulator expect of me?
What is the scope of my regulatory responsibility?
To what extent can I be held responsible for the (in)actions of others?
Where is my greatest exposure?
What is the regulator’s most likely avenue of challenge?
How do I satisfy the new duty of responsibility?
How can I reconcile my statutory duties as a director with my regulatory responsibilities?

These questions (amongst others) are answered in Individual Accountability Under the Senior Managers Regime – A Practical Guide (Thomson Reuters), by David Berman, Head of Financial Services Regulation at Macfarlanes LLP.

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