FCA and PRA crackdown on senior bankers

In one of three consultation papers released today it was stated that bosses involved must have “the personal characteristics, the necessary level of competence, knowledge and experience and appropriate qualifications and training to enable the sound and prudent management of the firm”.

The focus is on long-term stability, as bankers’ bonuses will be delayed for a minimum of five to seven years depending on seniority, while from 1 January 2015 bonuses can be clawed back for up to seven years after being awarded.

Under the rules firms will be able to recover money from the senior management if risk management failings come into light.

Andrew Bailey, chief executive of the PRA said: “Holding individuals to account is a key component of our job as regulators of banks.

“The combination of clearer individual responsibilities and enhanced risk management incentives will encourage individuals in banks to take greater responsibility for their actions.

“We believe that enhancing individual accountability and improving the alignment of risk and reward should have a positive impact on behaviour and culture within banks and will help to ensure that they are managed in a way that promotes the safety and soundness of individual institutions.”

The FCA and PRA said they were acting in the interests of the public by ensuring bank bosses have financial incentives to avoid banking failures.

Martin Wheatley, chief executive of the FCA said: “How a firm conducts its business and treats its customers must be at the heart of how it operates.

“This has to start at the top. Today’s consultations mark a fundamental change in the regulators’ ability to hold individuals to account, which is what the public expects of us.

“It will also build on the cultural change we are beginning to see in the boardrooms of firms across the country.”