Four months into the new accountability regime for banks, how did the industry handle its arrival and what’s next? Simon Mercer, ComplianceServe Product Manager at Unicorn Training puts the questions to Philippa Grocott, Partner, FSTP, and Richard Whittington, Training and Development Manager, Shawbrook Bank.
SM: So first thing’s first; how has adjusting to the new accountability regime been for you?
RW: As a specialist savings and lending organisation Shawbrook is a niche bank; it isn’t set up the same as bigger banks, so accountability for Senior Manager Functions and certificated individuals look quite different. That was a challenge as our first roadmaps looking at the individual roles to be assigned under the regime looked quite big and had so many people in them. But the business was going through a lot of change at the time – including a new CEO – so it was an apt time to look at roles and re-evaluate positions. We started considering what the structure should look like last summer, so we had a good lead-time to refine anything as we approached the deadlines to ask for permissions and submit paperwork to the regulator.
PG: Certainly some firms were far more prepared than others. Some nearly left it too late and it was a last minute effort to get their documentation in as what they perceived to be a small task turned out to be far bigger. Aligning which prescribed responsibilities go with which Senior Manager Functions (and who should take them depending on the business structure) caused much debate between the Senior Managers in firms.
SM: Where did the major challenges arise for you (or for your clients)?
PG: There was inevitably reluctance from some people to take prescribed responsibilities under the new regime as, if you take them, you’re accountable, and I suppose some were anxious about whether they knew enough to take a certain prescribed responsibility.
RW: We found that particularly in the HR environment there was an awful lot that needed doing. For example, reaching out to companies we do employee checks with and asking could they take on the extra parts required under the regime. Then establishing whether we had the systems capable of logging and reporting on certain information – for example, disciplinary action around a regulatory breach. Then asking what department was going to own that – central compliance? HR? – and if so, which part? So we found ourselves with a lot of decisions to make about who was going to do what and where the responsibility sits.
SM: And did you find that anything needed extra attention – or at least, more maybe than you anticipated?
RW: It’s been really important to get an even balance between what the regulator says and what it means for individuals – particularly for those perhaps who work in IT, HR or even finance, who are not used to regulation and the requirements that come with their responsibilities under the new regime. Our challenge has been to find a way to support those individuals to ensure they are properly trained and competent to carry out their roles and are confident and comfortable doing it.
PG: I think from where we sit, areas of change such as Statements of Responsibility have proved most problematic for some. A Statement of Responsibility details how a prescribed responsibility works in a firm; but when the FCA said these weren’t mandatory, many firms didn’t do them. Now if a regulator is reviewing documentation that matches X person to Y prescribed responsibility with little more than a ‘tick in a box’, they’re going to have to make assumptions about the way these responsibilities are being carried out; and whether they’re being measured. Getting this documentation right has, for many, meant taking time to detail and submit far more detailed statements of responsibility than before.
As far as evidencing competency is concerned, CPD alone doesn’t cut it
SM: Obviously we know that the next step is to certify individuals falling within the Certification Regime as ‘fit and proper’, and training all other staff on the Conduct Rules by 7 March 2017. How prepared are firms?
PG: Now firms have submitted their documentation the key thing is to decide how they are going to certify their people through an assessment process and collect the evidence of this in case there’s a need to prove training processes to a regulator. As far as evidencing competency is concerned, CPD alone doesn’t cut it; there has to be an amalgamation of observation, assessment etc, so it’s a more complex need than before. Naturally, those firms that had procedures in place already will be more prepared than perhaps the challenger banks and smaller organisations who previously weren’t subject to the same certification regime, but who will now come under the same scrutiny as, say, a financial planner or investment manager.
RW: I feel really comfortable as a training manager! We’ve been working with Unicorn to ensure the eLearning content we need is ready to roll out when we want to do the ‘right time’ learning so it’s fresh in people’s minds. You always want a blended approach, so using eLearning to get key messages across to the masses, but also face-to-face training – especially for those dealing with higher risk, or to whom being accountable under the FCA regime is new. My job is now to ensure that is all in place and we have the right resources to do it effectively.
SM: In what ways have you found the Senior Manager and Certification regimes have helped streamline policies and processes, especially around T&C?
PG: Post SMR, we’ve seen a definite shift to ensure that firms understand the importance of highlighting the right competencies for prospective employees that will sit within the Certification Regime. Arguably it’s going to get harder to recruit for Senior Manager Functions so firms will have to start ‘growing their own’. A good job description helps in recruitment, but it also helps develop people as you can identify what needs to be done with an individual for them to fulfill a new role and develop their careers. It’s also better for the business because you start looking at what people need to be ‘board ready’; how they have to behave, what is expected of them, and what core competencies they need to have.
RW: The regime changes have helped us be more focused in our approach to individual aspects of T&C that sit within these: We’ve taken the approach of having an overarching T&C framework, and under that, a scheme for each business area plus one specifically for the Senior Manager and Certification regime staff members. If any changes are needed, it’s easier to take a scheme and adapt it without having to change the whole framework. This has also allowed us to make sure our policies, processes, procedures and documents around all this are clear and succinct. Sticking to these schemes across the organisation gives us a huge amount of information that shows an individual is competent in that role –and also gives them information for when they are in board or committee meetings, for example, so they have a good idea about what they need to do to demonstrate their competence to others. For our T&C schemes we adopted the FCA recommendation of 35 hours CPD (21 of which is structured), and although that is only really for certificated individuals in certain roles, it’s a good benchmark for the rest of the bank to aim for. On our ComplianceServe platform the CPD counter shows people how they are progressing against the scheme in a way that’s visual and meaningful. There is still a bit of a paper trail, but through the platform we can manage all T&C centrally, with forms, CPD logging and reporting in one place.
SM: What’s your key message for the rest of the industry facing the 2018 accountability deadline?
RW: Sometimes it’s easy to forget it’s the individual who is accountable; it’s down to them to provide the right information at the recruitment stage; and when they start, to take control of their own T&C needs, performance management etc. They need to work with their line manager, as well as training and HR business partners, to ensure they are fit to carry on in their role, and that if needed, suitable adjustments can be made.
PG: You cannot start soon enough! We ran an HR compliance event recently where we found some people who had gone through SMR already and others that hadn’t – and their key message was ‘give yourselves plenty of time!’ A lot of our clients have started the process already and won’t be in a panic; they will have plenty of time to really think how they are going to address it and hit what the regulator requires, in the most effective way for their business structure.
Whether you are a large organisation or a small one, one takeaway is certain – allowing sufficient time for your firm to adapt to the new regime is crucial. The challenges posed by the changes are shared by firms across the industry. Now half way through 2016, the uptake in behavioural change certainly seems positive; as for the future of accountability in this sector, you’ll have to watch this space!
