The Spotlight Falls on Senior Management
This evening I was fortunate in attending a seminar organised by the Financial Services Authority dealing with the regulator’s vetting process for senior management in financial institutions (termed “Significant Influence Function” holders or “SIF’s”).
What followed was a fascinating insight into the regulator’s newly found fervour and desire to re-shape the landscape following the credit crunch.
The meeting was chaired by Graeme Ashley-Fenn, Director of Permissions, and Ron Baxter, a senior advisor to the FSA.
Ron focused on the key causes of banking failures which he put down to problems with corporate governance. By this he means problems with “oversight and control” in regulated businesses. He went on to say that the failure was not one of structure of corporate governance but rather one of attitude and competence in terms of senior management.
The FSA is determined to promote / provoke a major cultural change in terms of these attutudes and describes the people dimension of corporate governance as its number one priority.
The regulator plans to use its vetting process for new applicants to SIF status as key initiative.
The onus will fall on firms to prove to the FSA why they believe that applicants are fit and proper to occupy the positions in question. Where firms succeed in making the business case, the FSA is less likely to summon applicants for an interview in Canary Wharf.
The points was made that most applications leave a lot to be desired in this respect. The interview is frequently a necessity given the absence of information in the application. The FSA will not be presriptive as to how and in what form the business case is made.
The delegates were informed that no applicants have been rejected to date since the new process came into force. That said, the tendency is to invite candidates to withdraw where they do not meet the criteria.
Not only will the regulator focus on new applicants. The FSA will also use its ongoing intercation with firms (e.g. Arrow) to continue to vet SIF’s.
The financial services industry is in for a tough time and management are challenged to change their cultural approach to corporate governance.
One of the services Risk Audit prov ides is a mentoring service designed to ease the pain of new SIF’s. We cannot turn you into “fit and proper” SIF’s. We cannot teach you how to game the process. We can help you make the process easier and ensure that the qualities of your future executives and NED’s are properly exhibited.
For more details please telephone Sandro Boeri on + 44 207 665 5481 or e-mail me at [email protected]