| Press releases
- Nearly half of senior managers surveyed recently believe strict new regulations risk putting future talent off taking leadership positions
- Senior managers rules welcomed, but concerns uncovered that “lasting records” of failures will bar managers from working in industry
- Differences between the approaches adopted by different regulators could significantly increase the regulatory burden on those charged with global responsibilities
New research from international financial services regulatory consultants, Bovill Newgate, reveals that stringent rules on senior management responsibilities risk deterring talented future leaders from taking top roles in the sector. Left unaddressed, this could threaten the future competitiveness of regions where levels of personal accountability are higher, according to the company. The research was conducted among senior managers in the world’s four largest financial centres*.
The insights are revealed as the Financial Conduct Authority closes its consultation this week (November 3rd) on extending the Senior Managers and Certification Regime to cover investment firms in the UK. The regulations introduced in March last year currently apply to banks and insurers. The FCA intends to roll the rules out to cover the remainder of the sector in 2018.
Bovill Newgate’s new report, “Held to Account”, finds that 44% of senior managers across the UK, US, Hong Kong and Singapore believe it will be difficult to attract quality candidates to leadership positions in regimes with high levels of personal liability.
The UK regime has among the highest levels of scrutiny and personal liability. The rules make senior managers directly accountable for their firms’ regulatory breaches, and ensures those with bad records cannot continue to work in the industry.
Ben Blackett-Ord, Chief Executive at Bovill Newgate, said:
“A decade from the start of the financial crisis, and a shift in regulatory focus from the institution to the individual is apparent. But we must also be alert to unintended consequences of the new rules affecting senior management. There is a real risk that these regimes could lead to a brain drain, where top talent no longer aspires to take up senior positions in financial services companies.
“There are clear concerns about the personal risk associated with these roles. For the sector to thrive we need to make sure financial services continues to attract the bright and the ambitious. If unaddressed, in regions with higher levels of individual responsibility this could impede growth and innovation and stymie industry diversity.”
Despite these worries, the international research found broad industry recognition of the need for the new rules. 50% of senior managers believe the level of regulatory scrutiny on them is appropriate, with a further one in ten feeling it is actually too low. The report considers it essential that regulators are proportionate in enforcing their rules.
Ben Blackett-Ord added:
“It is reassuring to see that leaders accept and understand why scrutiny of their accountability is higher than ever before. But it is also evident that the potential leaders of tomorrow in the financial services industry are being deterred by what they view as the “lasting record” nature of the new regulations, where judgement errors could bar them from working in the industry again.
“Only time will tell whether the Senior Managers and Certification Regime can deliver what it aims to achieve.”
The report compares regulatory regimes in the UK, US, Hong Kong and Singapore. It finds that while the robustness of the UK’s new regime may have negative effects it could also provide the UK with a competitive advantage. The report’s research finds jurisdictions with clearly defined strict accountability rules are more attractive to business leaders.
ENDS
Download the full report 
Held to account – The competitive impact of enhanced senior management responsibilities in global financial services
