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Supporting Guidance to the BSB’s F&P Assessment Principles

The BSB is today (20 February 2018) publishing Supporting Guidance to its Statement of Good Practice: Fitness and Propriety (F&P) Assessment Principles. This guidance focuses on helping firms to identify and deal with risks and issues that may arise when assessing the F&P of their certified staff. The publication of this final guidance follows a public consultation, from 13 July to 29 September 2017. A summary and analysis of the responses we received is included in the consultation report published alongside the final guidance.

BSB good practice guidance is developed in partnership with its member firms and represents a pooling of knowledge and experience. It does not impose any legal or regulatory obligations but gives firms an idea of what ‘good’ looks like when they are considering their own policies and procedures.

Supporting Guidance 2: Establishing pass/fail criteria and evidencing the F&P assessment

Consultation report

About this guidance

This Supporting Guidance is the product of work by the BSB’s Certification Regime Working Group (CRWG). The CRWG was established in early 2016 to enable BSB members both to learn from each other about implementation of the new Certification Regime and identify areas where consistency of approach could be beneficial.

During 2016, the CRWG focused on establishing a common understanding of F&P and how to assess it. In February 2017, the BSB published a Statement of Good Practice 1 on Fitness and Propriety Assessment Principles and Supporting Guidance on Fitness and Propriety Definitions, Sources of Information and Assessment Record Template to set out a good practice framework for firms assessing the F&P of their certified staff.

In discussion with the CRWG, the BSB has developed further good practice guidance focusing on the certification decision. This guidance is intended to help firms and individuals making certification decisions, especially in cases where the issues are not clear-cut. It includes:

  • factors to consider when evaluating the evidence used in assessing F&P;
  • an overview of the options available to firms in making certification decisions;
  • examples of dealing with certification risks and issues; and
  • good practice in recording the outcomes of an F&P assessment.

This guidance draws on a series of discussions with the CRWG. These have explored the processes firms have implemented, the outcomes for individuals following F&P assessments and the outcomes for firms where analysis of F&P assessments indicates a wider risk or issue. It also draws on the responses we received during our consultation. The key changes we made following consultation include:

  • revising our approach to the use of illustrative examples as tools for firms;
  • amendments to the structure of the document to aid readers; and
  • clarifying our position on the balance of responsibilities between firms and individuals.

The Certification Regime

The Certification Regime came into force on 7 March 2016 and is part of the strengthened Individual Accountability Regime introduced by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).[1] The Certification Regime applies to approximately 32,000 staff[2] working in roles that could pose a risk of significant harm to their employing firm or its customers and it currently extends to banks, building societies, credit unions, the largest investment banks that are regulated by the PRA and branches of foreign banks operating in the UK. It is designed to support the Senior Managers Regime which captures only the most senior people working in firms.

Under the Certification Regime, firms are required to issue a certificate to staff in high-risk roles[3] on at least an annual basis[4]. Before issuing a certificate to a member of staff for a role, the firm must be satisfied that the person is fit and proper to perform that role.

 

[1] https://www.fca.org.uk/firms/senior-managers-certification-regime

[2] HM Treasury, 2015, Senior Managers and Certification Regime: extension to all FSMA authorised persons https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/468328/SMCR_policy_paper_final_15102015.pdf

[3] The list of significant harm functions that the FCA require certificates to be issued for can be found in the FCA handbook in SYSC 5.2.30: https://handbook.fca.org.uk/handbook/SYSC/5/2.html. The PRA’s expectations of how firms should act when deciding which roles are ‘certification functions’ can be found in Supervisory Statement SS28/15 Strengthening individual accountability in banking on the Bank of England’s website: http://www.bankofengland.co.uk/pra/Pages/publications/ss/2017/ss2815update.aspx

[4] Section 63F(5) of the Financial Services and Markets Act 2000 (as amended) specifies that a certificate is valid for a period of 12 months although the FCA have clarified their expectation that a firm may issue a certificate valid for a period of less than 12 months in FIT 5.2.12: https://www.handbook.fca.org.uk/handbook/SYSC/5.pdf