Holding top execs to account ‘critical’ to maintaining robust regulation, Bank of England says
Holding top banking executives to account is a “critical” part of the regulatory regime, a Bank of England official said today, as the central bank consults on the largest changes to its enforcement policies in a decade.
The Bank’s head of enforcement and litigation Oliver Dearie said “the Bank continues to consider individual accountability to be critical to maintaining a robust regulatory framework”.
Speaking at the Financial Services Lawyers Associations, Dearie said senior managers “set the tone” at a firm by deciding on controls and risk management. “The consequences of getting that wrong can be enormous,” he continued.
The Bank is consulting on new enforcement proposals, which Dearie described as “the most comprehensive revisions to our enforcement policies” since it became responsible for prudential regulation a decade ago.
Under the draft plans, a new ‘early account scheme’ has been proposed that would enable individuals and companies to halve their fines if they cooperate early on with an investigation by the Prudential Regulation Authority (PRA), which sits within the Bank.
Currently there is no incentive to settle early as all settled cases receive a flat 30 per cent discount, irrespective of when individuals or companies accept that breaches occurred.
Dearie said the proposals underline the focus on senior managers as they will be held responsible for ensuring that firms provide accurate information to regulators. Senior managers could face sanctions for “non-compliance or provision of false or misleading information”.
However, the scheme received some criticism from lawyers. They highlighted that problems could emerge if firms chose to settle with the regulator but individuals opted to fight.
Dearie said, however, that these were not new risks, arguing that “investigators frequently have to establish the facts amongst competing narratives.”
He added that the introduction of the scheme could make investigations more efficient, which is something that many firms have been asking for.
Another key objective of the new policies is to create a consolidated package of enforcement policies. The Bank, including the PRA, has a range of investigatory and enforcement powers under various different statutory regimes. Firms have complained that this makes it difficult to know exactly what powers the regulator has.
Dearie said that this would help “to underscore the breadth of the enforcement powers at our disposal and signal to the broader community our preparedness to use the full suite of enforcement powers”.
This is particularly important given that the scope of the Bank’s enforcement powers are expanding to include critical third parties to the country’s banking sector, such as clearing houses, under the Financial Services and Markets Bill.