City bosses have welcomed the Treasury’s U-turn on controversial plans for a so-called “reverse burden of proof” for senior bankers, saying that the reversal will help the Square Mile retain and attract top talent.
A leading City head-hunter told City A.M. that the Treasury’s initial proposals, which would have required bankers to prove they were unaware of any wrongdoing at their institutions, would “undoubtedly” have “had the effect of putting people off joining the boards or taking roles in the financial services sector”.
But the decision this week to abandon the reverse burden of proof “greatly reduces the chilling effect”, he said.
The Treasury said yesterday that a “duty of responsibility” will instead be applied to bankers under the Senior Managers’ and Certification Regime, remains set to go into effect next March.
Oliver Parry, senior corporate governance adviser at the Institute of Directors (IoD), welcomed the news yesterday, saying the FCA was “right” to drop the “ridiculous” reverse burden of proof requirements.
“Scandals across the banking industry such as Libor, foreign exchange rate-rigging and PPI misselling have given bankers a toxic name and we support the regulators as they seek to address what went wrong before, during and after the financial crash,” Parry said.
“This rule, however, which was both unworkable and excessive, was a step too far.”
Sarah Isted, financial services risk and regulation partner at PwC, told City A.M. that the reverse burden of proof had sparked widespread concern among firms that they would need to keep painstaking records of all decisions – causing “paralysis at board level”.
Isted said that as a result of the Treasury’s about-turn, boards will instead “be able to focus on making sure they are taking reasonable steps without getting bogged down in excessive documentation”.
Parry, meanwhile, claimed that non-executives should be removed from the regime altogether.
“Non-executive directors do not have the same responsibilities or decision-making powers as executives who run the businesses on a day-to-day basis,” he said, adding that their inclusion in the regime was “too much”.
The head-hunter agreed, telling City A.M. that to “expect non-executives to be shadow executives and know everything that is going on is unreasonable”.
“That’s not what the job is about,” he said.