Building accountability under the Senior Managers Regime

Between complying with complex regulations, managing diverse teams, and running day-to-day operations, managers in the banking and insurance industries are held to high standards of performance and accountability. These standards are created and enforced at both the company-level and among national regulatory agencies. However, while private management practices are primarily aimed at improving effectiveness and efficiency, legal regulations addressing financial managers tend to focus on overall economic stability and consumer protection.

The Senior Managers Regime (SMR) is an increasingly important component of the financial regulatory structure in the United Kingdom. The Regime is aimed at increasing oversight and accountability in the nation’s financial activities by establishing clear roles and responsibilities for senior managers in banking and insurance industries. The law applies to any firm that operates as a Bank, Building Society, Credit Union, a large investment bank, or insurance company in the UK. Because the regulatory agencies implementing the law are ramping up enforcement, compliance officials in these industries are raising concerns about its requirements. However, the management structure established by the SMR may provide a helpful model for any organization seeking to increase accountability and decrease risk in managerial activities.

SMR structure and function

The economic trauma caused by the financial crisis of 2008 may have faded in many of our memories, but financial regulators around the world are acting to prevent the mismanagement and market abuse that contributed to the economic downturn. The SMR imposes strict requirements on the most senior individuals performing the most critical roles in UK banking, as well as any employee in a position to impact the firm or its customers

In addition to imposing a broadly-applicable and strict code of conduct, the SMR creates a three-tiered accountability system for managers in banking and insurance. First, the Regime requires companies to detail senior managers’ areas of personal responsibility within the regulated company in a “Statement of Responsibility.” Next, the data is translated into a “Firm Responsibility Map” which shows how people and their work duties line up. Senior managers are responsible for specific activities, which are referred to as “Prescribed Responsibilities” under the Regime, as well as their firm’s daily functions. By recording and organizing who within a regulated industry is responsible for what activities, the SMR makes is simpler to identify and correct non-compliance.

Financial regulation with teeth

When UK financial regulators announced the Senior Managers Regime, there were murmurs around the industry that it was nothing more than a paper tiger – a financial regulation that’s all bark and no bite. However, the financial regulators behind the Regime have already completed a major enforcement action this year that successfully curbed corporate corruption.

Earlier this year, Barclays CEO Jes Staley was personally fined over £1.1 million for inappropriately pressuring his colleagues to unmask an employee who was acting as an informant to financial regulators. This early win for the Regime made waves in the industry, and people across the UK are starting to see that the nation’s regulators will wield the Senior Managers Regime as a weapon if need be. With the high degree of financial and reputational risk at stake for a potential violation of the Regime, companies active in the UK banking and insurance industries would be wise to pay heed to the new rules.

In today’s increasingly globalized economy, regulated companies need the highest-grade enterprise technology and management systems on the market. Modern banking and insurance businesses are bound to strict standards, and they need to install compliant management structures that ensure these standards can be achieved.

 

 

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