New rules to hold bosses responsible for wrongdoing at British banks may be deterring some bankers from taking on senior management roles and even prompting big-hitters to play down their own importance, say industry experts.
LONDON, ENGLAND, UK (VNR) – New rules to hold bosses responsible for wrongdoing at British banks are deterring some bankers from taking on senior management roles and even prompting big-hitters to play down their own importance, say industry experts.
Public anger that so few senior bankers were punished after taxpayers bailed out the industry in the financial crisis, or for scandals such as Libor and currency-market rigging, has led to the rules which make it easier to hold them to account.
The Senior Managers Regime (SMR) from Monday (March 7) replaces a system that UK lawmakers criticised for giving illusory control over individuals with little prospect of enforcement action.
A step change in banking rules, it will allow regulators to pin blame on named people rather than just firms, which lawyers have said triggered anxiety among top bankers.
Mike Ingram is a Market Analyst at BGC Partners.
“Well I think there are certainly some who might be put off being promoted into a senior managerial position if they are going to be within the senior manager regime net. I think more immediately however I think I would be rather worried about the reaction of non-executive directors who don’t necessarily have the day to day hands on experience that executive managers might have but are equally in the senior managing regime. So I think that from a corporate government perspective we need good non-executive directors on board. Not just the banks but of any companies and I fear that this piece of legislation whilst on paper a very very good thing may actually have some very perverse and unfortunate consequences,” Ingram said.
Unlike the old system, bankers deemed to wield significant managerial influence will have to sign up to a legal duty of responsibility for their units, and show they took reasonable steps to prevent or stop rulebreaking that comes to light.
They include CEOs, heads of big business units, and non-executive directors who chair key committees and will amount to about 10,000 staff across 900 banking companies, or an average of about 12 per firm, rising to 40-50 for the biggest lenders.