Stay informed with free updates
Simply sign up to the UK financial regulation myFT Digest — delivered directly to your inbox.
The UK’s top banking regulator will today say its overhaul of rules introduced after the 2008 financial crisis shows it is focusing more on economic growth, as it prepares to streamline the regime to make bankers more accountable.
Sam Woods, chief executive of the Prudential Regulation Authority, will use his annual City dinner speech to financial executives in London on Thursday to rebuff criticism that it is not doing enough to aid economic expansion, according to people briefed on the matter.
The speech comes only days after Sir Keir Starmer vowed to “rip up” Britain’s bureaucracy and urged regulators to prioritise growth, as the prime minister encouraged international investors to commit more money to the UK.
Woods, also a deputy governor of the Bank of England, is expected to tell City bosses there is more the PRA can do to support growth and competitiveness, since the previous Conservative government made this a formal objective for Britain’s main financial regulators last year.
One of the areas where the PRA is expected to announce proposals in the coming weeks is on the senior managers and certification regime, which was introduced in 2016 to make top bankers accountable for wrongdoing or failings under their watch.
The regime, created in response to criticism that many of the bankers who caused the 2008 financial crash escaped unpunished, means top executives at UK banks must be approved as “fit and proper” by regulators and have their responsibilities clearly outlined.
These senior managers can be subjected to enforcement action for wrongdoing and even face criminal prosecution if they cause a bank to fail. Banks are also required to check that a wider group of employees who are responsible for taking significant risks are suitable for their role and record them on a public register.
Only two bankers have been fined under the senior managers regime: a TSB executive who was last year held responsible for an IT outage and the former head of Wyelands Bank — the defunct lender at the heart of Sanjeev Gupta’s steel-to-finance conglomerate — earlier this year. But officials say that other enforcement actions have been carried out under earlier rules.
Jenny Stainsby, head of financial services regulation at law firm Herbert Smith Freehills, said proposals to change the senior managers regime were likely to be “imminent” and they were expected to involve modifying the rules rather than “a wholesale rethink”.
“The proposed changes are expected to be around the edges — intended to smooth the clunkier parts of the regime and provide more guidance where that has been missing,” she said.
The PRA issued a discussion paper with the Financial Conduct Authority last year asking for feedback on the senior managers regime as part of their review of the rules.
UK Finance, a banking lobby group, said in response that the rules had created “huge challenges due to the lengthy approval process” and suggested several ways they could be “streamlined” including narrowing the types of roles requiring regulatory approval.
It also complained that regulators kept adding new responsibilities, such as a duty to consider if consumers are getting fair value.
Many of the other measures introduced by the UK in response to the 2008 banking crisis have recently been or are in the process of being reworked to make them less onerous. Woods is likely to highlight these as examples of a greater focus on supporting growth.
Last year, regulators scrapped a cap on bankers’ bonuses that was inherited from the EU as part of a post-Brexit push to boost the City of London.
The PRA last month watered down its initial proposals for applying the Basel capital rules to British lenders and announced a simpler set of rules for smaller lenders.
This week the government announced plans to dilute the UK’s ringfencing regime that forces bigger banks to separate retail-focused operations from riskier investment banking activities.
Regulators are also expected to announce proposals soon for softening the rules around the deferral and clawback of bankers’ bonuses, which mean payouts can be delayed by as much as seven years.
Read the full article here