Legend has it that in the war against the Olympians, Atlas and his brother Menoetius sided with the Titans. When the Titans were defeated, many of them were confined to Tartarus. Zeus condemned Atlas, the losing leader to stand at the western edge of Gaia (the Earth) and hold up The Heavens on his shoulders, as a punishment for losing.
In a similar ‘Ironie du sort’, the FCA and PRA have called on senior management within Banks, building societies, credit unions, insurance firms and PRA designated-investment firms to step-up and show more accountability (hold the earth, as it were!!). The Senior Management and Certification Regime has come into force on March 7th 2016 in the UK. The new framework has three components: Senior Manager Regime (SMR), Certification Regime, Rules of Conduct.
As an aftermath of numerous scams, market manipulations, subversive practices and regulatory fines in the financial markets, regulators are seeking to reinstate the trust between individuals and the Banks. And to contribute to evolution of improved CONDUCT.
Some highlights of the Senior Managers Regime
- It focuses on individuals who hold key roles and responsibilities in relevant firms.
- The SMR will require firms to allocate responsibilities to senior managers and to assess their fitness and propriety on a regular basis.
- Between the FCA and PRA, 30 prescribed responsibilities are defined.
- Senior Manager approval applications to the regulator will need to include a ‘Statement of Responsibility’.
- A ‘Manager Responsibility Map’ is to be created outlining key areas that need management attention.
- The statute imposes conditions and time limits on approvals of senior managers.
- Chairmen and non-executive directors will be included as “Senior Management Functions“. ‘They will be explicitly held to account for boardroom decisions, and deemed potentially culpable for poor decisions as executive directors’, as per the EY paper titled Senior Managers on the hook.
- The roles classified as ‘Senior Managers’ would include the likes of Chairman of the Board, CEO, CFO, CRO, Heads of Business area, Head of Internal Audit, Chairmen of Risk and Audit committees, Chief of compliance, amongst others.
- Where a senior person is found to have committed misconduct, regulators may impose an unlimited fine or ban the person from certain types of functions.
- The length of time that the regulator can take disciplinary action against a Senior Manager has been doubled from three to six years.
- For instances of reckless misconduct, leading to insolvency of a bank a person guilty of offence is liable to an unlimited fine and/or upto seven years in prison.
In his evidence to the Treasury Select Committee in September 2013, the FCA’s chief executive Martin Wheatley observed that it was “hard to nail and individual against responsibility because matrix organisation structures and committee decision making means that individuals can always defuse responsibility.” Such a regulation is likely to impact across the rungs of the organisation, as ‘accountability’ is cascaded to the ‘next in chain’, once it is so identified.
As is evident, the rules cover a fairly large ground and seem to want to raise accountability and drive higher standards of personal conduct. The bar has definitely been raised.
It remains to be seen how long the identified Atlas’ will carry the weight of the Earth, i.e. the ‘assigned responsibility’. Would they soon become unwilling to take bold decisions and start to look for unsuspecting Hercules to pass on the load?
© Anu Maakan 2016
(Disclaimer: all views published here are the personal views of the author and do not represent those of any organization).