Thursday 16 March 2017 1:25 pm

Cleaning up culture in the financial sector and holding senior managers to account is not a witch hunt, insists Andrew Bailey, chief of City watchdog

Making sure financial sector bosses take responsibility for wrongdoings is not a witch hunt, the chief of the City watchdog said today.

Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), said the financial crisis had caused many people to question whether head honchos in the City were really taking responsibility for their actions, but stressed this was not about trying to find scapegoats to take the fall.

"This was sometimes portrayed as blood lust or a witch hunt, but in fact it was asking the reasonable question, 'Who is responsible and thus will be accountable for what happens'," Bailey told an audience at the Hong Kong Management Association annual conference.

Bailey went on to defend the recently introduced Senior Managers' and Certification Regime, designed to hold managers to account for misdeeds carried out on their watch.

The Senior Managers' Regime was introduced for banks and insurers last March, with plans to roll it out to the wider financial industry shortly.

Meanwhile, the Certification Regime, which came into force earlier this month, requires firms to identify workers who could pose "significant harm" to clients or the company itself, and issue those workers with a yearly certificate declaring they are "fit and proper" to carry out their role.

This slew of red tape was intended to prevent managers getting away with turning a blind eye to their staff's behaviour, Bailey said, which had created problems getting people to take responsibility in the fallout of the 2008 crisis.

"The key feature of all this for me is the simplicity of the concept of responsibility and accountability, and the powerful effects that comes from such simplicity," he added. "The effect on culture should be profound, and I say that in a good sense."

Bailey described culture in the financial sector as "elusive" with an unfortunate habit of being "everywhere and nowhere".

"Culture can be remarkably resilient in the face of attempts to change it," the watchdog chief continued. "However, if culture is ignored then an opportunity is lost to tackle one of the major root causes of conduct failures."

A recent survey by Duff & Phelps discovered more than half (55 per cent) of senior execs feel the Senior Managers' Regime has so far had a positive impact on the banking and alternative investment communities.