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Banking Standards Board Publishes Certification Regime, Fitness and Propriety Guidance

The Banking Standards Board has today (Tuesday 28 February) published good practice guidance for banks and building societies putting in place procedures to assess the fitness and propriety of staff under the new Certification Regime1.

Download the Statement of Good Practice 1 on the Certification Regime: Fitness and Propriety Assessment Principles  and Supporting Guidance to Statement of Good Practice 1 on the Certification Regime: Definitions, Sources of Information and Assessment Record Template.

Recognising the opportunity presented by the new regime to help to promote professionalism across the banking sector, the BSB set up a member firm working group2 to share experiences and facilitate the identification of good practice to help to achieve a fair and effective implementation.

The working group met regularly throughout 2016, and following a three-month consultation process, the BSB is now publishing two documents: a Statement of Good Practice on the assessment of fitness and propriety within the Certification Regime, and more detailed Supporting Guidance on implementation.

Commenting on the new guidance, BSB CEO Alison Cottrell said:

‘This is the BSB’s first Statement of Good Practice. It provides firms with practical guidance on how to assess fitness and propriety within the new Certification Regime in a way that is fair, effective and helps promote professionalism and high standards of behaviour and competence across the banking sector.

‘I would like to thank all of the BSB members who contributed to this work and shared their ideas and experience.’

Clare Woodman, Global Chief Operating Officer for Institutional Securities at Morgan Stanley, added:

‘The BSB has successfully brought together a broad range of Financial Services organisations to aggregate their diverse experiences and deliver certification guidance that will help firms navigate common problems, thereby encouraging consistency, minimising rework, and accelerating progress. By leveraging the practical lessons learned, the certification guidance is actionable and useful to firms both large and small.’

Alison Robb, Group Director of Nationwide Building Society, said:

‘The BSB working group has been incredibly useful in bringing firms together to work collaboratively to both contribute and agree a high-level set of principles and produce practical guidance for assessing fitness and propriety.

Nationwide Building Society is committed to helping raise standards across UK banks and building societies and has valued the opportunity to be part of this important work.’

Mike Kirsopp, Chief Executive, Cambridge & Counties Bank, said:

‘Having the opportunity, through our membership of the BSB working group, to explore with others some of the challenges of implementing the Certification Regime has been extremely useful and insightful.

The resulting principles and guidance have emerged through the open sharing of knowledge and best practice, discussion of specific issues and possible situations within the group, and provides a framework built on commonality of understanding and consistency of approach and we congratulate the BSB for facilitating.

It has enabled us to evaluate our in-house practice and develop it further, with the reassurance that we are approaching things in the same way as others across the industry.’

James Bardrick, Citi Country Officer, United Kingdom and CEO, Citigroup Global Markets Limited, said:

‘Citi very much welcomes the BSB guidance on Fitness and Propriety. It provides a holistic overview of the approach the sector can take and reinforces and supports much of the work we have done.

The BSB has also created a valuable forum for discussing and developing future work and direction in this important area.’

Jenna Cotter, Senior Regulation Manager, Santander UK said: ‘Sharing collective knowledge as part of the BSB working group and being able to take away industry insights has helped us come up with more credible and informed solutions to tackle some of the challenging aspects of the Certification Regime’.

The published documents consist of:

BSB Statement of Good Practice – Fitness & Propriety Assessment Principles

This takes the form of a high-level set of principles surrounding the assessment of fitness and propriety and is designed to encourage and help firms to use the Certification Regime as a means to raise professional standards and ensure that F&P assessments are fair, consistent and transparent.

BSB Supporting Guidance

This is practical guidance, which represents a pooling of knowledge and experience by BSB member firms from which the whole industry can learn. It contains;

  • comprehensive definitions of each element of F&P; honesty and integrity, reputation, competence and capability, and financial soundness
  • potential sources of information that could be taken into account when carrying out the assessments
  • example assessment record template to support consistent recording of the outcome of F&P decisions across firms

The BSB Certification Working Group will be exploring a number of other areas in more detail during 2017 including fitness and propriety in the international context and factors firms need to consider when sharing information about previous employees.

  1. The Certification Regime came into force in March 2016 and is part of a broader suite of regulation aimed at strengthening individual accountability within the banking sector. As part of the Certification Regime firms are required to certify that all individuals, in roles which pose a risk of significant harm, are ‘fit and proper’ by 7th March 2017 and on an ongoing basis.
  2. The BSB Certification Regime Working Group currently has senior representation from 19 BSB member firms.
  3. See the BSB Statement of Good Practice and Supporting Guidance

Senior Managers and Certification Regime

Exploring how the SMCR - and especially Certification - can be implemented in the most effective way across the sector.

The Senior Managers and Certification Regime is a major regulatory change that will affect all banks and building societies. Responding to recommendations by the Parliamentary Commission on Banking Standards, the government and regulators have together developed a comprehensive framework to ensure better accountability and responsibility for behaviour, competence and culture in banks and building societies. The new framework provides an opportunity for the industry to focus on and demonstrate a culture of professionalism. We are working with firms and regulators to facilitate this, including areas where a common approach across firms could support both the objectives of the regime and the skills and development of the people covered by it.

Professionalism

Evaluating whether a more 'professional' approach to banking would improve behaviour and competence across the industry.

The Parliamentary Commission on Banking Standards found that 'banking culture has all too often been characterised by an absence of any sense of collective responsibility to uphold the reputation of the industry', and argued that a greater focus on professionalism could be an answer to this. Working with a leading team at the University of Leeds, we are researching the issues around professionalism in banking. In particular, we are reviewing how professional qualifications are currently used across the sector, and at whether a stronger role for professional bodies, along the lines seen in some other sectors, like medicine or law, would help raise standards. To inform this work and develop a rounded picture of 'professionalism' and what it means in banking, we are surveying banks and building societies, professional bodies and a wide range of other interested groups, including consumer bodies and investors.

Assessments

Providing an honest and impartial assessment to Boards of progress against objectives on behaviour, competence and culture.

The BSB assessment exercise presents Boards with an objective and impartial view of their firm's culture, identifying where things are working well and recommending areas for improvement. It draws on information not only from Boards and senior teams, but also from employees, investors (or members), trade unions, customer groups and other relevant bodies. In doing so, it will provide constructive challenge to each firm individually, while building a collective understanding of common issues across the industry, or sectors within it. We undertook our first annual assessment exercise in 2015 with ten firms (Barclays, Citi, HSBC Bank, Lloyds Banking Group, Metro Bank, Morgan Stanley International, Nationwide, RBS, Santander UK and Standard Chartered). The BSB itself will not publish individual assessment reports - each firm owns its own report - but key themes and messages will be set out in the BSB's annual report, the first of which will be published in Spring 2016. Given that Board engagement is central to the assessment work, only firms that have their headquarters in the UK are eligible for the full assessment exercise. All firms, including branches of firms headquartered overseas, will however be included in a focused membership-wide survey, which will allow each participating firm to benchmark itself against its peer group.

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