The new Senior Managers Regime, Certification Regime and Conduct Rules in the UK: The Sharpening of the “Sword of Damocles”?
Abstract: The “Sword of Damocles” is the ancient Greek allegorical tale of the imminent and ever-present peril faced by those in positions of great wealth and power. This article provides an overview of the new Senior Managers Regime, the Certification Regime and the Conduct Rules. It explains how the new regimes seek to sharpen the sword of the current Approved Persons Regime and considers whether they are likely to be effective in strengthening individual accountability and improving culture and governance in the UK banking sector.
Introduction
In their Consultation Paper “Strengthening accountability in banking”, published in July 2015[1] (the “Consultation Paper”), the Financial Conduct Authority (FCA) confirms rules for a new accountability framework for individuals working in banks, building societies and credit unions. In addition to ensuring that senior managers are held accountable in the future for any misconduct that falls within their area of responsibility, the new framework aims to hold individuals working at all levels in banks and other relevant firms to appropriate standards of conduct.
The Prudential Regulation Authority (PRA) has simultaneously issued a Policy Statement, which contains some of its final rules on accountability.[2] Both the FCA and the PRA have therefore provided combined final rules for the new accountability framework.
In addition to setting down final rules, the FCA is also consulting on amending rules in regard to the certification of individuals (the “Certification Regime”) involved in wholesale activity, for example trading.[3] Those proposals are set out in Chapter 6 of the Consultation Paper which apply to both UK relevant firms and incoming branches of overseas relevant firms. In particular, the FCA is consulting on amending the regime to ensure individuals who could pose significant harm to the firm or its customers are subject to the Certification Regime. [4] In addition, removing the territorial limitation for material risk takers in both the Certification Regime and Conduct Rules.
Shazia K. Afghan has an LLM in Banking and Finance Law from the Centre of Commercial Law Studies at Queen Mary University of London. She is a visiting research fellow at the Institute of Regulation and Ethics and a Consultant for the Banking Standards Board in the UK.
