Last month banks provided City regulators with individual statements of responsibility for every one of their senior managers, detailing their personal accountabilities. This was in preparation for the Senior Managers Regime, which will be enforced from 7 March. Regulators have made clear that they’re aiming to go after the most senior managers, rather than their more junior staff.
So not to worry if you are not a senior manager, right?
Errrr… no. The related certification regime is likely to be even more hazardous for those bankers who find themselves required to be certified every year as fit and proper by their senior managers. Under the current approved persons regime, a banker who deals with clients requires the City regulators' one-off, explicit approval to do so before he or she starts any new job.
In the new certification regime, every banker performing a "serious harm" function will have to be certified by their bank's senior managers instead and then re-certified every year.
On every annual re-certification, any past disciplinary history for the previous six years will be re-considered, especially if there have been any further disciplinary issues over the last year. There will be no formal mechanism to refer any "non-routine" certification decisions to the City regulators for their opinion.
Instead, there will be personal dis-incentives for the senior managers involved, and in particular for the senior manager responsible for overseeing a bank's certification decisions, should they have to take any HR risks themselves.
So what can you do to protect yourself? If you are a senior banker and in a position to be held personally accountable by the City regulators, make sure you are insured. Check whether you are within the scope of the bank's Directors and Officers' insurance. Check also whether you have an indemnity from your bank should you become involved in any regulatory proceedings. Whilst your legal costs can be insured, you will have to pay any fines or serve any bans from the City yourself.
The cornerstone for the certification regime will be a new system of regulatory references from all your employers of the past six years, so whenever you have to be certified by either your existing bank or a new bank, consider your past employment history for at least the last six years. Now that there is an onus on all your past and present employers to be more candid about you, will they be fair and balanced in what they might say? With your current employer, could any internal process call into question its next certification decision?
As banking regulation becomes more personal, make sure you have considered all the angles when your employment history is up for review.