The Economic Secretary to the Treasury (Andrea Leadsom)
This Government have taken significant steps to reform the UK’s system of financial regulation.
In the Financial Services (Banking Reform) Act 2013 (“the Act”), we legislated to strengthen the accountability of bank senior management and to raise standards of individual conduct in the banking sector. I am now announcing the timetable for bringing the senior managers and certification regime (SM and CR) created by these reforms into operation. I am also announcing the Government’s plans for applying the SM and CR to foreign banks operating through branches in the UK.
The introduction of the SM and CR will be a major reform with significant implications for the firms concerned—banks, building societies, credit unions and investment firms regulated by the Prudential Regulation Authority (PRA) and for the individuals, particularly senior managers, who work in those firms. The Government have therefore decided, following discussions with the Financial Conduct Authority (FCA) and the PRA, that the SM and CR will come into operation on 7 March 2016. In order to facilitate an orderly transition from the existing approved persons regime, firms will be required to notify the regulators by 8 February 2016 of the approved persons who are to be senior managers under the SM and CR.
The Treasury will make the necessary commencement order (under section 148 of the Act) and a transitional provisions order (under section 146 of the Act) shortly.
The Government issued a consultation on whether to extend the SM and CR to UK branches of foreign institutions on 17 November 2014. The consultation closed on 30 January 2015 and the Government have been considering the responses received.
The Government have now decided to proceed with this measure. It will come into operation on the same date—7 March 2016—as the SM and CR applying to UK firms and foreign institutions will also have until 8 February 2016 to notify the regulators of the approved persons who are to be senior managers in their UK branches.
The Treasury must now make an order—subject to the affirmative procedure—under section 71A of the Financial Services and Markets Act 2000 to implement the measure. The Government intend to arrange the debates as early as possible in the next Parliament.
The PRA and FCA will shortly be consulting on additional SM and CR rules. These rules will help ensure that the SM and CR is applied in an appropriate and proportionate way to foreign institutions operating through branches in the UK.
The commencement order will also bring sections 36 to 38 of the Act into force from 7 March 2016. This means that the new criminal offence relating to decisions causing a financial institution to fail could apply to decisions taken by senior managers in UK banks, building societies and PRA-regulated investment firms—but not credit unions or any foreign institution—on or after that date.
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