Senior UK bank managers could face seven years in jail or an unlimited fine if their actions cause their institution to fail.
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div>Senior UK bank managers could face seven years in jail or an unlimited fine if their actions cause their institution to fail.
The new law, which comes into force today, is part of the government’s plans to reform the UK’s financial services sector to ensure that lessons have been learnt from previous financial crises.
The new rules mean that individuals working in UK firms face some of the toughest sanctions in the world.
“This government has learnt the lessons of the past,” commented George Osborne, the Chancellor of the Exchequer.
“The new criminal offence, which becomes law today, is the latest milestone in my plan to ensure that the British banking industry operates to the highest possible standard. It is absolutely right that a senior manager whose actions causes their bank to fail should face jail.”
From today, senior UK managers in banks, building societies or other investment firms regulated by the Prudential Regulation Authority, will have committed a criminal offence if:
· he or she agrees to the taking of a decision which causes the institution to fail
· at the time of the decision, he or she was aware of the risk that the decision could cause the institution to fail
· his or her conduct in relation to the decision fell far below what could reasonably be expected of a senior manager in that position
Also coming into force today is the new Senior Managers and Certification Regime (SM&CR) which replaces the existing Approved Persons Regime for deposit takers and investment banks.
The new regime shifts responsibility for ensuring key staff below senior management levels are fit and proper to the firms themselves.
The top people of these institutions will have “statements of responsibility”, which means they will have nowhere to hide if their firm breaches regulatory requirements.
Steve Girdler, Managing Director for EMEA and APAC at HireRight, said that if any wrongdoing came to light, senior leaders had to show they personally took action in the areas for which they were accountable.
Steve said: “As a result, for many firms, there remains an elephant in the room - what should they do when information about senior leaders raises questions about their suitability for a senior role, such as undeclared directorships or a relevant criminal record?
“Such highly sensitive information has the potential to not only damage the reputation of a firm, but also its financial performance - and could warrant a number of people moving out of senior positions as organisations look to safeguard themselves over the coming months.
“But by reviewing existing policies and procedures, agreeing and documenting a consistent approach to dealing with any issues as they arise, firms can limit the impact of the regulation and make sure that they are ready in twelve months when the FCA starts checking their checks.”
Under the SM&CR, regulators will also have greater flexibility to impose high standards of conduct on a wider range of staff, including individuals doing jobs for which prior regulatory approval is not required.
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