Statement of Good Practice 1 — Certification Regime: Assessing fitness and propriety
The new Certification Regime commenced on 7 March 2016. It requires senior managers to attest annually to the ‘fitness and propriety’ (F&P) of individuals who are managing significant risks. These employees, along with almost all employees in a bank or building society, are also required to act in accordance with new Conduct Rules introduced on the same date.
While the new regulation is clear in its requirement that firms assess the F&P of certified individuals, it leaves the detail of how this should be done largely to firms themselves. Given the importance of the new regime to standards of both behaviour and competence across the banking sector, the BSB began in early 2016 to explore with its members the scope for both learning from each other about implementation of the new regime and identifying areas where consistency of approach could be beneficial.
Following these initial discussions, a Certification Regime Working Group (CRWG) drawn from BSB member firms was convened in January 2016 to help to develop a common understanding of the policy and operational issues associated with the Certification regime and to establish good practice guidance and examples.
The CRWG met nine times throughout 2016 and, in June 2016, the BSB launched a three-month public consultation in relation to the draft guidance on assessing fitness and propriety.
The culmination of this work is the publication by the BSB of two documents designed to help firms to use the Certification Regime as a means of raising professional standards. These are:
- Statement of Good Practice 1 on the Certification Regime: Fitness and Propriety Assessment Principles — This document supports firms in their implementation of the Certification Regime by providing a set of high-level principles on the assessment of fitness and propriety; and
- Supporting Guidance to Statement of Good Practice 1 on the Certification Regime: Definitions, Sources of Information and Assessment Record Template — This document should be read in conjunction with Statement of Good Practice 1 on the Certification Regime: Fitness and Propriety Assessment Principles and provides firms and those assessing fitness and propriety with further information on what each element of fitness and propriety means and how it might be assessed.
An analysis of the feedback received during the consultation exercise can be found in the consultation report. The main changes in light of the feedback received during the consultation are:
- the F&P Assessment Principles document is now the primary Statement of Good Practice, with all other documents acting as Supporting Guidance;
- the Definitions, Sources of Information and Assessment Record Template have been combined into a single piece of Supporting Guidance;
- the definition of ‘honesty and integrity’ has been changed
- the Sources of Information have been changed to provide greater clarity on which sources of information are appropriate for different types of assessment (e.g. annual assessment, new to role assessment) and to provide greater clarity as to when some sources of information are likely to be relevant to the consideration of a person’s fitness and propriety; and
- the Assessment Record Template has been shortened and simplified.
The work of the Certification Regime Working Group on assessing fitness and propriety continues, and further proposed Statements of Good Practice and Supporting Guidance will be published for consultation during 2017 covering issues such as:
- identifying and evaluating risks and issues related to Certification i.e. circumstances which, should they materialise, could call into question whether an individual is fit and proper to perform their role;
- assessing the F&P of individuals working outside the UK or moving to the UK from overseas; and
- factors to consider when sharing information about Certified individuals when they move between firms (linked to recent requirements for firms to provide ‘regulatory references’).