FCA proposes new measures to maintain firms’ focus on culture

29th September 2016

The Financial Conduct Authority (FCA) will mark six months since the implementation of the Senior Managers’ and Certification Regime by providing feedback on implementation so far and proposing measures to further strengthen the regime. The proposed rules will reinforce the importance of individual accountability at the most senior level of organisations.

 The new measures are part of the FCA’s continued focus on culture and build on initiatives which further help the FCA identify and assess key senior individuals. The FCA has confirmed final rules on regulatory references, which clarify the information that firms are required to share with one another as part of recruiting to key roles.

 The FCA will also consult on:

  • Guidance for Senior Managers on the ‘Duty of Responsibility’
  • A new requirement for UK branches of overseas banks to tell their UK based employees about the whistleblowing services offered by the FCA and the PRA
  • Extending the conduct rules to all non-executive directors of banks and insurers

In addition, the FCA will publish a discussion paper about how those heading up the legal function in firms should be treated under the Senior Managers and Certification Regime.

Andrew Bailey, Chief Executive of the FCA, said “Six months on and, in a great many cases, firms have made a substantial effort to get this right and embrace the importance of the key principles underlying the Senior Managers and Certification Regime, namely responsibility and accountability. Knowing who is responsible for what is critical for firms and regulators and we have seen genuine engagement on this from the Board down.

 “Generally, we have observed that firms are taking their responsibilities seriously and have broadly got the regime right. 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.”

Responsibility, accountability and governance in financial services firms and their impact on conduct has been, and remains, a priority for the FCA with a focus on the most significant drivers of good or poor mindsets and behaviours. This includes incentives and remuneration, and the steps firms take which address associated risks.

Ahead of the introduction of the Senior Managers and Certification Regime in March this year, most firms sent detailed grandfathering notifications, statements of responsibilities and firm responsibilities maps. In some cases, the FCA has seen evidence of overlapping or unclear allocation of responsibilities. In other cases firms appear to be sharing responsibility amongst more junior staff, obscuring who is genuinely responsible. This goes against the intent of the Senior Managers and Certification Regime and must be addressed.

The FCA reviewed a sample of the documentation submitted and is publishing tailored feedback for UK banks and building societies, non-EEA branches, incoming EEA branches and credit unions.

The Senior Managers’ and Certification Regime will be extended to all regulated financial services firms from 2018.