UK regulators water down post-2008 rules holding City bosses to account
Bank of England and FCA plans would free about 140,000 managers from enhanced checks and cut reporting of lower-level misconduct by financial firms.
At a glance
- The Bank of England and FCA plan to water down post-2008 rules that held senior City executives accountable for wrongdoing.
- About 140,000 managers would be freed from enhanced 'fit and proper' checks and annual integrity requirements.
- Regulators say the changes save businesses about £2bn over 10 years and cut their own costs.
The Bank of England and the Financial Conduct Authority (FCA) have set out plans to water down rules introduced after the 2008 financial crisis that were designed to hold senior City executives accountable for wrongdoing. The proposals were announced as the two regulators hosted a dinner for City executives at Mansion House in central London.
Under the plans, about 140,000 managers would no longer have to undergo enhanced checks or show each year that they are operating with "integrity" and following regulators' conduct rules. Only the most senior executives, such as chief executives and chief financial officers, would have to prove they are "fit and proper" every year and before taking new jobs.
Reporting rules loosened
The changes would also loosen rules on how often firms report bad behaviour by lower-level staff. Companies would no longer have to report first warnings or "lower-level misconduct of limited relevance" to the regulators' targets, with cited examples including staff showing up late or dropping calls.
Firms would instead be required to report only "serious misconduct" and cases where staff are given final warnings or are fired. Initial cases of misconduct would still have to be flagged for top brass, including the chief executive and chief financial officer.
Background to the regime
The senior managers regime came into force in the mid-2010s in response to widespread public anger over the 2008 banking crash, after few bank bosses were held to account for actions that contributed to the financial crisis. It originally covered banks and was later expanded to all financial services companies, including asset managers and hedge funds.
The proposals are the latest set of City rules to be scaled back since the government gave regulators a new objective: ensuring UK firms are competitive on the world stage. Those efforts have already helped lift the cap on banker bonuses, which had been limited to two times a banker's salary.
Cost savings and safeguards
Regulators said removing these "unnecessary burdens" would save businesses about £2bn over 10 years, while cutting the Bank of England's costs by £11.5m and the FCA's by £229m each year.
In a joint statement, the Bank of England and the FCA said the move would not mean bosses get away with bad behaviour, adding that "high standards of individual accountability and conduct will remain unchanged, including the regulators' commitment to ensuring that individuals are accountable for misconduct that affects society as well as their employers".
Source: The Guardian Business.
Questions and answers
- What is the senior managers regime?
- It is a set of UK rules introduced in the mid-2010s, after the 2008 banking crash, to hold senior financial executives accountable. It originally covered banks and was later extended to asset managers, hedge funds and other financial firms.
- How much will the changes save?
- Regulators say removing the 'unnecessary burdens' will save businesses about £2bn over 10 years. The Bank of England's costs would fall by £11.5m a year and the FCA's by £229m a year.
- Will bosses still be held accountable?
- The Bank of England and the FCA said high standards of individual accountability and conduct remain unchanged. They said individuals would still be accountable for misconduct affecting society as well as their employers.
