The Treasury has U-turned on its controversial plans for a so-called “reverse burden of proof”, which would have demanded that bankers prove they were unaware of any wrongdoing at their institutions, or else face prosecution.
The heavily-trailed rules, part of a proposed new Senior Managers & Certification regime, would have imposed a guilty until proven innocent burden on top execs, prompting fears that the introduction of such a regime would scare the cream of the banking world’s talent away from the City.
Instead, a “duty of responsibility” will be applied, which requires management to take appropriate steps to prevent a regulatory breach from occurring.
The reversal comes as part of a new bill that seeks to extend rules making individual senior bankers more responsible for failings on their watch to cover not just banking but the entire financial sector.
Last night the Bank of England played down the Treasury’s change of heart.
“The introduction of the ‘duty of responsibility’ in place of the’presumption' makes little difference to the substance of the new regime,” said Andrew Bailey, deputy governor of prudential regulation, Bank of England and chief executive of the Prudential Regulation Authority.
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When the rules were unveiled earlier this year, then-chief executive of the Financial Conduct Authority (FCA) Martin Wheatley said they would “add further momentum to improving standards across the industry”.
However, Tracey McDermott, acting head of the FCA, said last night: “While the presumption of responsibility could have been helpful, it was never a panacea.”
She added: “Extending the senior managers’ and certification regime is an important step in embedding a culture of personal responsibility throughout the financial services industry.”
The new regime will be extended to cover fund managers, mortgage brokers and consumer credit firms from 2018.
“The focus for firms and individuals should be on complying with both the letter and the spirit of the rules rather than considering ways to circumvent them,” the Bank said.