Individual accountability is the cornerstone of the new banking regime which came into force on 7 March 2016. The new regulatory framework introduced by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) applies to a wide range of financial institutions, including UK banks, building societies, investments firms and branches of foreign banks operating in the UK. And whilst you may have completed the necessary paperwork by the initial deadlines, ongoing compliance with the regime will impose new working practices over the coming months and years.
Under the senior managers regime (SMR), all affected organisations should already have identified all individuals holding senior management functions (SMFs), allocated the prescribed responsibilities to at least one SMF, prepared statements of responsibility for all SMFs and sought pre-approval from the FCA/PRA, together with a complete management responsibilities map. Following on from this, contracts of employment for all SMFs should be updated to ensure that they (and any job descriptions) accurately reflect each SMF’s responsibilities as well as requiring each SMF to abide by any mandatory new conduct rules. Organisations will also need to provide training to all SMFs and certified staff on the requirements of the new regime, particularly around the FCA and PRA conduct rules.
Affected individuals should make themselves aware of the requirement of the new regime, ensure that they fully understand their allocated responsibilities and attend all relevant training.
In addition, all those staff carrying out roles who could pose a risk of significant harm to their employer or its customers must be certified on recruitment and annually thereafter as fit and proper to carry out their allocated responsibilities. In addition, processes should be put in place to ensure effective handover arrangements on SMF staff changes and compliance with the new regulatory reference regime.
As of 7 March 2016, organisations regulated by the PRA are now required to provide references to other regulated organisations “as soon as reasonably practicable” on request setting out “all relevant information” of which they are aware. When recruiting, organisations must take reasonable steps to obtain appropriate references from the candidate’s current and previous employers (or where they were a non-executive director) going back at least five years.
We have advised both organisations and individuals on compliance with the new regime. This has included drafting or reviewing new contracts of employment and non-executive director letters of appointment to ensure compliance with both the SMR and certification regimes, dealing with issues such as the impact on bonus schemes and the timing of annual leave.