The CEO of the Financial Conduct Authority (FCA) is warning that some banks are going “against the intention” of new rules designed to punish senior executives for wrongdoing.
In his first column since taking the role in July this year, FCA CEO Andrew Bailey talks about the new senior managers’ regime introduced by the regulator 6 months ago. The new rules are meant to clearly set out responsibilities in an organisation, giving the watchdog licence to punish managers and executives whose subordinates break the rules.
“Since the regime was introduced, we have been undertaking work to ensure that senior manager responsibilities are properly allocated and understood in firms. In some cases, we have seen evidence of overlapping or unclear allocation of responsibilities. In other cases firms appear to be sharing responsibility amongst more junior staff, obscuring who is genuinely responsible. This goes against the intention of the senior managers and certification regime and should not continue.”
Only a handful of bankers went to prison as a result of wrongdoing in the run-up to the 2008 financial crisis and the new rules are part of the FCA’s efforts to bring more accountability to the sector. However, there was some suggestion that even the new rules are too soft on bankers.
Despite some bad apples, Bailey writes that: “Generally, we have observed that firms are taking their responsibilities seriously and have broadly got the regime right.
“But we recognise culture change takes time and there is still more to do. So we have to keep a watchful eye on the progress firms are making.”
Bailey, who was executive director of banking at the Bank of England until 2011, also defends the FCA’s decision last year to drop an inquiry into banking culture, a move widely seen as kowtowing to the wishes of bankers.
Bailey writes: “This led to a number of commentators saying the FCA doesn’t care about culture in financial services. I have been chief executive of the FCA for three months and I can tell you that nothing could be further from the truth. Culture matters a great deal.”