FACTBOX - New UK rules hold bank bosses accountable for misconduct | Reuters - Firstpost
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FACTBOX - New UK rules hold bank bosses accountable for misconduct | Reuters

Updated: Mar 6, 2016 15:15 IST

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LONDON Britain's financial regulators introduce the new Senior Managers Regime (SMR) on Monday to make top bankers accountable for misconduct at their companies.

The reform is in response to public anger that, under the previous system, few senior bankers were punished after taxpayers had to bail out several lenders during the 2007-09 financial crisis.

Banks have also been fined billions of pounds for trying to rig currency markets and interest rate benchmarks but few individuals have been held to account.

The SMR, which aims to make it easier to pinpoint where blame lies when things go wrong, will be enforced by the Bank of England's Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

The following are its main elements:


Appointments of staff who come under the SMR, such as chief executives, chief financial officers and non-executive directors who chair remuneration, risk, audit and nominations committees, must be approved by regulators.

Senior managers must sign up to a specific "statutory duty of responsibility", meaning they will have to show they took "reasonable steps" to stop a rule breach from occurring or continuing. This will cover about 10,000 staff in about 900 banking firms.

Banks must also give newly-appointed senior managers all the information that they could be reasonably expected to need to do their jobs. They will also have to draft and maintain a map of who is responsible for what at the bank, ensuring that all business areas are covered.

Punishment for breaches include fines and bans from working in the industry.

A new criminal offence covering "reckless decisions" that cause a financial institution to fail, which will be punishable by up to seven years in prison


The regime applies to UK branches of foreign banks from outside the European Union that accept deposits in Britain or deal in investments.


From March 2017, banks will have to certify on an annual basis to the "fitness and propriety" of about 65,000 staff who are not among the senior managers, but who are "material risk-takers", meaning their decisions could harm the company.

Staff under the certification regime won't need regulatory approval but detailed, formal references will have to be available to regulators if required.

Employees covered by the SMR and certification rules will have to abide by codes of conduct.


The government plans to roll out the SMR and certification rules to all other parts of the regulated financial sector in 2018, including the bond, currency, and commodity markets, and asset managers.

(Reporting by Huw Jones; Editing by Pravin Char)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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