LONDON (Reuters) - Some banks are fudging which staff are ultimately responsible for decisions, contravening a new regime designed to make it easier to apportion blame if something goes wrong, Britain’s top market regulator said on Wednesday.
The senior managers regime (SMR) was introduced in March to replace a previous system that lawmakers had criticised as giving only illusory control over individuals with little prospect of enforcement action.
The SMR includes a so-called certification regime, where banks certify each year as to the “fitness and propriety” of staff who are not senior managers but who are “material risk-takers”, or employees whose decisions could harm the company.
“In some cases, we have seen evidence of overlapping or unclear allocation of responsibilities,” Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), said on Wednesday.
“In other cases firms appear to be sharing responsibility amongst more junior staff, obscuring who is genuinely responsible. This goes against the intention of the senior managers and certification regime and should not continue.”
The SMR also makes senior bank staff, such as the chief executive, chief financial officer and heads of trading desks, obtain regulatory approval for their appointments and spell out their exact responsibilities.
Bailey’s comments came as the FCA and the Bank of England’s Prudential Regulation Authority (PRA) published a series of policies to reinforce accountability in financial services.
Many of the documents, such as the requirement to have proper references when hiring bankers, were final versions of proposals made earlier this year.
“They represent a robust yet proportionate framework to prevent the ‘recycling’ of individuals with poor conduct records across PRA-regulated firms,” the PRA said.
It said banks must apply the European Union’s cap on bonuses from January to comply with EU rules that are being updated.
The two regulators also proposed that UK branches of overseas banks must tell employees in the country about the whistleblowing services the FCA and PRA offer.
They proposed extending the conduct rules to non-executive directors of banks and insurers and presented a paper on how those heading up banks’ legal functions should be treated under the SMR and certification regime.
“Generally, we have observed that firms are taking their responsibilities seriously and have broadly got the regime right,” Bailey said.
“But we recognise culture change takes time and there is still more to do. So we have to keep a watchful eye on the progress firms are making.”
Reporting by Huw Jones; editing by David Clarke