For many in financial services and associated industries, this year’s thrilling page-turner has been the snappily entitled “CP15/22 Strengthening Accountability in Banking” from the Financial Conduct Authority (and its stablemate, the PRA’s Policy Statement PS16/15).
From March 2016 new rules come into force which will add some substance to the government’s message of implementing ‘tougher rules’ for Britain’s bankers as part of ‘far-reaching reforms to the banking sector’.
The publications set out guidelines for a new accountability framework for individuals working in banks, building societies and credit unions. The regulations are said to be designed to make sure senior managers are held accountable for any misconduct that falls within their area of responsibility, and to hold individuals working at all levels in banks and other relevant firms to appropriate standards of conduct.
They bring more people into scope than previous regimes, and carry the powers to prosecute senior managers in financial businesses whose actions are deemed reckless enough to cause their institutions to fail.
We have been helping our financial services clients carry out assessments in line with the new regulations. A core aspect of the regulation is that it requires firms to assess fitness and propriety of in-scope employees to perform their role, upon recruitment and on a yearly basis. Approved persons are also subject to rules including ‘acting with integrity acting with due skill, care and diligence’, and fitness and propriety includes demonstrating ‘honesty, integrity and reputation’, and ‘competence and capability’.
The message seems to be that regulators want evidence that employers are paying attention to behaviour and culture. Firms may also be required to provide information regarding their rationale for appointing a person into a role for which certification is sought, and regulators reserve the right to challenge the process by which it makes such recommendations. That “they have worked in the city for years” is unlikely to get a big tick from the FCA, we think. We believe that this element of the regime represents a challenge to those responsible for talent acquisition and HR to ensure and demonstrate compliance.
A robust and consistent method of assessing behaviour and competence will show a firm to be taking regulation seriously as well as represent best practice in assessment methods. We believe the regulators may have provided a compelling case for HR professionals who seek to get the business on board with best practice recruitment and people management activities. Above all, we believe this places recruitment, performance management and talent management at the heart of the matter.
It will be interesting to see which teams grab the initiative and are ready for launch in March 2016.