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FCA says bankers need 'common sense' to comply with new conduct rules
May 28, 2015 / 1:23 PM / 3 years ago

FCA says bankers need 'common sense' to comply with new conduct rules

LONDON (Reuters) - Bankers in Britain must use common sense when applying new rules on being held personally responsible for wrongdoing in their business as there won’t be detailed guidance that lawyers can use in their defence, a top watchdog said on Thursday.

The logo of the Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren/Files

The new Senior Manager Regime (SMR) comes into effect in March 2016 to make it easier for regulators to punish individuals for wrongdoing.

So far fines for misconduct such as rigging currency markets and interest rate benchmarks have been limited to the banks themselves rather than individuals.

One element of the new regime has raised hackles, triggering warnings that bankers will prefer to leave the industry rather than face having to prove they were not negligent in the event of misconduct being uncovered on their watch.

Currently it is for the regulator to show an individual was negligent.

Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), said that despite the “scale of the misplaced alarm” over the new regime, he won’t be giving a list of specific ways for a manager to “rebut” charges of being responsible for misconduct in the business.

“For lawyers, the slightly unsatisfactory answer here, but honest one, is that it’s very difficult for policymakers to be prescriptive about the steps that a particular individual is expected to take,” Wheatley told a ResPublica think tank event.

“And actually, for those senior managers, most of the steps you’d expect them to take appear common sense, frankly.”

The steps include behaving with integrity, making sure the business area is fully understood and complying with common law and rules.

The new regime is not part of a “heads on sticks” strategy at the FCA and there was no prospect of institutional scalp hunting or “public theatre”.

Wheatley warned he would take a much closer look at middle management at banks, a supervisory “blind spot” that has undermined watchdog’s attempts to raise conduct standards.

While the boards of banks were keen to improve standards, it was harder getting the message to staff lower down the ranks.

The only bank staff that won’t be covered by new conduct standards are ancillary employees such as receptionists, security, caterers and cleaners, Wheatley said.

“We have the almost unique experience of having access both to the board and to the person on the till,” Wheatley said.

This access will be used to deliver the FCA’s drive to improve standards at thousands of staff such as regional sales managers, he said.

Editing by Greg Mahlich

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