New proposals from the UK’s banking regulators aim to make people working in the banking sector more responsible and accountable for their actions.
The proposals, published by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), centre around
- a new approval regime for the most senior individuals whose behaviour and decisions have the potential to bring a bank to failure, or to cause serious harm to customers; and
- introducing new rules on remuneration (such as bonuses) to strengthen the link between long-term risk and reward in the banking sector, including postponing the payment of bonuses for up to seven years, and making it easier for firms to recover such bonuses from senior management if poor conduct come to light at a later date.
Holding people to account is a key part of the banking regulators’ job, PRA chief executive Andrew Bailey says.
“We believe that enhancing individual accountability and improving the alignment of risk and reward should have a positive impact on behaviour and culture within banks, and will help to ensure that they are managed in a way that promotes the safety and soundness of individual institutions.”
FCA chief executive Martin Wheatley says how a firm does business and treats its customers must start at the top.
The consultation marks “a fundamental change in the regulators’ ability to hold individuals to account, which is what the public expects of us”, he says.
“It will also build on the cultural change we are beginning to see in the boardrooms of firms across the country.”
Final rules will be published in 2015.
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