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FSA wants to vet top bank appointment shortlists

LONDON (Reuters) - The Financial Services Authority (FSA) wants to closely vet senior job candidates when top banks draw up shortlists -- not after they pinpoint a preferred candidate -- the financial regulator said Wednesday.

Since October 2008, when the FSA started scrutinising top banking candidates in the wake of the credit crisis, it has quizzed 172 candidates for top positions. Eighteen withdrew applications, it said.

In a letter to 5,000 chief executives of financial institutions, the FSA said it expected to be engaged early in the recruitment process -- or companies risked appointment announcements being derailed.

Although some compliance officers at banks broadly support the FSA efforts to scrutinise banks, others have accused the regulator of risking imposing unacceptable restrictions on business strategies, appointments and company independence.

The FSA has demanded it interview top candidates for jobs including chairman, chief executive, finance director and risk director at key banks -- and supervise senior staff with so-called “significant influence functions” (SIFs).

“One of the key questions we expect relevant senior management of a firm to be able to answer is: ‘What are the circumstances under which the firm will fail?’

“In assessing competence, we will expect senior management to be able to demonstrate their understanding of the inherent risks in the business/markets and to articulate what plans are in place to mitigate the risk of failure,” the FSA wrote in the letter.

A beefed-up FSA is riling parts of the financial industry as it slams tough new capital and liquidity requirements on banks, scrutinises appointments and attempts to both spearhead global attempts to curb bonuses and take on a greater enforcement role.

“The onus is on firms to ensure candidates applying for influential positions are fit and proper to perform the role,” said Graeme Ashley-Fenn, FSA director of permissions, decisions and reporting.

“Our individually tailored approval interviews will help us assess whether the individual has the right experience and understanding but also whether they will enhance the overall management strength and insight of the firm.”

Financial institutions wanting to appoint top staff need to send an application to the FSA outlining role responsibilities, recruitment, interview and appointment processes and how they have ensured the candidate is fit and proper for the job.

Interviews, which take place at the FSA offices, last about 90 minutes.

Since August 6, the FSA has also started interviewing staff at overseas parent companies, whose decisions are regularly taken into account by a UK-based subsidiary, as well as traders who are likely to exert “significant influence” on a firm.

Reporting by Kirstin Ridley; Editing by Jon Loades-Carter

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