Within a few short weeks the UK Financial Services industry will see a new era of individual accountability and responsibility unfold with the Senior Managers Regime coming into effect on March 7, 2016.
Developed in the wake of the 2008 credit crisis on the recommendation of the independent Parliamentary Commission on Banking Standards (PCBS), the Senior Managers' Regime (SMR) and Certification Regime (CR) is a key part of the Government’s push to reform the culture and conduct within UK Financial Services. It will see Directors and chairs of board committees, CEO’s and other senior managers become personally accountable for the risk-taking activities of their firms.
While the Senior Managers' Regime (SMR) and Certification Regime (CR) will have a range of impacts on across the city, one area that is not getting a lot of coverage at the moment but is highly likely to have significant unintended consequences for individual banks and the industry as a whole is the effect this regime will have on the ability of Banks to attract and retain senior management and leadership talent.
Over the coming months and years how many times will we see a repeat of the story that has emerged from Barclays over the last few days, with the announcement that Tom King, the head of their Investment Bank is to leave the bank. In their reporting of this departure, the FT suggested that the accountabilities rules contained within the Senior Manager’s Regime played a significant part is Mr King’s retirement.
So with the introduction of the Senior Managers’ Regime only a few short weeks away and the month-end risk reporting cycle about to go into full swing for many banks, I suggest that it is time for Human Capital related risk(s) on the Corporate Risk Register to be re-assessed ahead of the introduction of the Senior Managers’ Regime and appropriate long-term risk migration initiatives developed. The reassessment of Human Capital risk, and development of risk migration initiatives should also happen within each UK Business Unit/Legal Entity initially, but given the international interest in the Senior Managers’ Regime and recent Department of Justice guidance on Individual Accountabilities, it might be prudent for firms to go beyond their Business Unit/Legal Entities.
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For more about culture in Financial Services and the Senior Manager's Regime check out http://www.cultureofaccountabilities.com
