The UK is watering down rules introduced in the aftermath of the financial crisis that were designed to hold City bosses accountable for wrongdoing.
The plans, put forward by the financial industry’s two top regulators, the Bank of England and the Financial Conduct Authority (FCA), include a reduction in reporting for “lower-level misconduct” and would also free 140,000 managers from extra checks.
The proposals were announced as regulators hosted a dinner for City executives at the Mansion House in central London. They are meant to“significantly” reduce the number of roles that will be required to undergo enhanced checks and would require only the most senior executives – such as chief executives and chief financial officers – to be forced to prove they are “fit and proper” each year, and before taking new jobs.
This will free about 140,000 staff from having to illustrate they are operating with “integrity” and following regulators’ conduct rules. It would be a watering down of measures that came into force in the mid-2010s, in response to widespread public anger over the 2008 banking crash.
The senior managers regime was meant to address the fact that few bank bosses were held to account for actions that contributed to the ensuing financial crisis. While the regime originally covered banks, it was later expanded to cover all financial services companies including asset managers and hedge funds.
It is the latest set of City rules to have been 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 were previously limited to two times a banker’s salary.
The new changes will also lead to the loosening of rules around how often firms report bad behaviour by lower level staff. It means they will no longer have to report first warnings or “lower-level misconduct of limited relevance” to regulator’s targets, such as if staff are showing up late or dropping calls.
Instead, they only want to hear about “serious misconduct” and cases where staff are given final warnings or fired. Any initial cases of misconduct will still have to be flagged for top brass, including chief executive and chief financial officers.
The regulators said removing these “unnecessary burdens” would save businesses about £2bn over 10 years while cutting the Bank of England’s and FCA’s costs by £11.5m and £229m each year, respectively.
The Bank of England and FCA said that this would not mean bosses would get away with bad behaviour. They said in a joint statement that the “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”.
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