The Senior Managers Regime has received a multitude of press coverage over the past few months due to the announcement of additional rules (and the broadening of the existing rules) by Mark Carney, governor of the Bank of England, in his speech in June. The 'final rules' were released at the beginnning of the July in CP15/22 Strengthening accountabilityin banking. The rules establish Carney's aim is to create a ‘culture of accountability’ by introducing precautionary, precise and punishable measures.
See some of the key news coverage below, or catch up via our latest blog.
Senior Manager's Regime will 'exacerbate' conflict between anti-money laundering and data protection rules, says expert
The banking regime reverses the burden of proof onto an individual who has responsibility for an area of the bank in which a breach of the regulatory regime occurs, making individual accountability an extremely hot topic.
The Telegraph 18/08/2015
The net has been cast even wider, but that doesn’t mean that it isn’t riddled with holes. Thousands more insurance workers and foreign bankers will be overseen by the Financial Conduct Authority and the Prudential Regulation Authority, now that the City watchdogs have expanded their plan to improve accountability in the financial services sector.
The 13th August 2015 was not just an unlucky number 13 but the date the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) chose to publish the long awaited rules on the Senior Insurers Manager Regime.
The Financial Conduct Authority and the Prudential Regulation Authority have today (13 August) published “near final rules” on bolstering accountability of top dogs at overseas banks with UK branches. The publication follows joint FCA-PRA final rules on improving individual accountability in the UK banking sector, which was published on the 7 July, which looked at top executives at UK banks.
The Financial Times 27/07/2015
Despite the softening tone from policymakers, new legislative powers are still working their way into force. The UK’s new Senior Managers Regime looms over executives and non-execs alike.
International Financial Law Review 20/07/2015
A growing number of individuals caught by the incoming Senior Managers Regime are seeking independent legal advice on their rights and responsibilities under the rules. Banks are taking very different stances on whether it is necessary.
FT Advisor 14/07/2015
The Financial Conduct Authority has attempted to relieve fears of the new senior managers and certification regime rules, by setting out the circumstances it would seek to apply the new regime and the steps that a senior manager should take to rebut it.
City AM 07/07/2015
Senior Managers Regime to Put Bankers in the Dock: Financial Conduct Authority Unveils New Accountability Rules
The new rules, which "embed personal accountability into the culture of The City", are divided into three points, the most notable of which is the Senior Managers Regime, which forces those holding certain senior roles at financial services firms to be legally accountable for their company's actions.
Managers must "allocate and map out responsibilities and prepare Statements of Responsibilities", while firms will be* "legally required to ensure that they have procedures in place to assess their fitness and propriety before applying for approval and at least annually afterwards".*
The Financial Times 11/06/2015
Mark Carney announced the end of ‘the age of irresponsibility’ with The Bank of England’s extension of the Senior Managers Regime to asset management firms, hedge funds, and even the bank of England itself, making even more senior managers across the financial services industry accountable. Katja Hall, deputy director-general of the CBI, said that they want “to help firms to finance growth and manage their risk” – a key strategy in aligning within the rules of the regime.
John Wertheim, former head of operational risk and risk governance at Morgan Stanley, said that the SMR is "quite scary" and will be "a real game changer" for the financial sector. He explained that it would extremely effective from a regulatory perspective and challenge the previous lack of accountability. Regulatory pressure from the SMR has become an operational risk problem for some firms. "The severity has just shot up, and how can you control that? It's difficult, but you can control the frequency," Wertheim said. "I would say focus on the risk appetite, and for every one of your op risks you can measure if you are exposed."
Money Beat 10/06/2015
The Fair and Effective Markets Review (FEMR) argued for longer jail sentences for traders found guilty of benchmark manipulation and spelled out guidelines for more controversial practices used to trade currencies, commodities and fixed income.
Andrew Tyrie MP (chairman of the Treasury Committee) emphasised that “ensuring that individuals know that they will be held responsible for their actions is crucial”, whilst Rob Moulton (regulatory partner at Ashurst law firm) claimed that “criminalising what has already been earmarked as unacceptable market practice is not a game changer. It does however increase the pressure on the UK regulator to take its first scalp.”
City A.M. 10/06/2015
Bank of England Fair and Effective Markets Review: Tens of Thousands More City Workers to be Covered by the Senior Managers Regime
Recommendations from The Fair and Effective Markets Review include extending the senior managers regime – under which top executives can be held criminally liable for bad decisions and neglecting their duties – to more businesses such as inter-dealer brokers and buy-side asset managers.
The Financial Times 10/06/2015
Daniel Godfrey, chief executive of the Investment Association, which represents the £5tn-plus UK asset management industry, said: “If the conclusion is making senior managers responsible for the people they employ, then that should apply across the whole financial industry”. Initial reaction to the review, particularly from US regulators, was cautious. Timothy Massad, chairman of the Commodity Futures Trading Commission told the Financial Times: “It’s interesting and we will certainly review it carefully.”
Michael Raffan, a regulatory partner at Freshfields Bruckhaus Deringer said, “There is both a degree of risk in being the first mover but also huge political and business kudos for the UK to be seen to take the lead in cleaning up the financial markets and setting new high standards in this global market.”