The obligations proposed by the regulators in relation to individuals appear to be particularly onerous for bank HR teams; we examine the potential consequences
The far-reaching proposals set out in the PRA and FCA joint consultation paper “Strengthening accountability in banking: a new regulatory framework for individuals” overhaul the current Approved Persons regime that came in for so much criticism from the Parliamentary Committee on Banking Standards following the financial crisis. A new three-tier framework intended to make it easier for regulators and banks to hold individuals to account has major ramifications for banks’ Human Resources teams and their interaction with other functions.
A new Senior Managers Regime will replace the current Significant Influence Function arrangements and apply primarily to Board and Executive Committee members and heads of key business areas and control functions. Such individuals will still need to be pre-approved by the regulators. In addition, banks will be required to submit a Statement of Responsibilities identifying the areas for which each Senior Manager is responsible. Banks will also need to produce and maintain a Responsibilities Map setting out their overall framework for the allocation of responsibilities to ensure there are no gaps in accountability.
A new Certification Regime will apply to employees who perform roles which are not Senior Manager functions but which relate to a bank’s regulatory activities and which could pose a risk of significant harm to the firm or any of its customers. The onus of assessing and certifying the fitness and propriety of such individuals to perform their roles will shift from the Regulator to banks themselves. Banks will also have to undertake annual reassessment and formal certification. The number of individuals caught by this regime will extend significantly beyond those covered by the existing Approved Persons regime. Read the full article >