Financial services’ biggest concerns about the Senior Managers Regime

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Through our work with the UK’s leading banks it has become apparent that there remain significant questions at the very highest levels in the industry about soon-to-be-implemented changes to UK financial regulation.

With the Senior Managers Regime, Certified Regime and Conduct Rules coming into force in just months, clear direction is needed to ensure a joined up, consistent approach to implementing the changes across the financial services’ landscape.

The changes will see those at the very top of organisations, and those performing “regulated roles” within the bank, undergoing annual assessments to ensure they are fit and proper to perform their responsibilities, as explained in HireRight’s recent blog on the FCA changes. This looks set to involve regular re-screening.

To discuss these issues and to start to develop a plan together to tackle them, HireRight ran a roundtable event in the heart of the City of London. The event brought together the top names in financial services including representatives from Commerzbank AG, Goldman Sachs, Nomura, Northern Trust and many others.

Four key issues were raised again and again as major concerns in implementing the changes successfully.

  1. What are the international implications?

There has been little guidance on how to implement the Financial Conduct Authority’s (FCA) proposals for candidates applying from beyond the UK, internal transfers from outside the UK or staff being seconded internally. In many cases, such as in France, the rules’ requirements go beyond what is currently legally acceptable. The FCA asks for ‘best efforts’ to be made to ensure that thorough checks are carried out, but in reality this could lead to every firm operating differently at a global level.

 

  1. What percentage of Certified Persons should be rescreened every year?

Every firm has a different risk appetite and focus on maintaining their reputation. As a result some banks are planning on annually re-screening a small percentage of their workforce – some all. Standardisation is going to be difficult to achieve without clear guidance on what is acceptable and what the FCA will regard as below expectations.

 

  1. How can the candidate experience be maintained?

There is a concern that hiring teams will be put under immense pressure from candidates and from those needing new staff in their teams as the recruitment process will increase. Time to hire will rise, and there will be a greater volume of forms to fill in – especially with the Statement of Responsibilities templates as they stand now. Expectations of talent need to be managed by the UK financial services industry to ensure that they continue to attract, hire and promote the best talent.

 

  1. Will the regulated reference process and template be simplified?

At the moment, the form is seen as being cumbersome, overly detailed and lacking specificity. In addition, some information it requires is problematic, such as including spent internal disciplinaries. There are concerns about implementation timeframes as the consultation period is still open. The anticipation is that final requirements might not be published until February 2016 but the expectation is still that the go-live date is March 2016.

There is also concern around how the re-issuing of references will be handled in reality. Who at the requesting bank will need to be informed? If the individual no longer works for that bank but has moved onto a second or third bank, who has the responsibility to inform those more recent employers?

HireRight is in the process of developing a report outlining these concerns and a number of other issues raised at the roundtable, which will be shared with the FCA to respond to ahead of the implementation of the new rules in March 2016. If you have any additional comments or concerns, please do get in touch.

HireRight will also create a set of best practice recommendations for financial service firms making changes to accommodate the new regime, and we will be running a webinar in the New Year.

Sign-up to receive further updates on the latest developments and follow our Managing Director for EMEA and APAC, Steve Girdler on Twitter @SteveGirdler.

HireRight

HireRight is here to help guide you through the biggest screening challenges so you can focus on what’s important to you; attracting top talent. HireRight provides employment background screening services to organisations of any size, in every industry, and nearly anywhere.

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The HireRight Blog is provided for informational purposes only and should not be construed as legal advice. Any statutes or laws cited in this article should be read in their entirety. If you or your customers have questions concerning compliance and obligations under United States or International laws or regulations, we suggest that you address these directly with your legal department or outside counsel.

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