Fri, Apr 10, 2015
Despite efforts, financial institutions continue to have gaps in their governance models and control structures, and are therefore prone to exposure to potential rogue behaviors which can pose serious challenges to their financial objectives and reputation.
Focus on part 4: Conduct on persons working in the Financial Services sector
In response to such challenges in order to decrease conduct risk by restoring confidence, shifting the focus to individual accountability and fostering cultural change within the financial services sector has taken a center stage within the regulatory agenda.
Part 4 of the Financial Services (Banking Reform) Act 2013 (the Act) could come into force as early as May 2015 and will transform the UK banking culture (and is likely to be extended to other financial institutions too). The aim of this Banking Reform is to decrease reputational damage, and therefore reduce indirect and direct costs as well as creating greater market efficiencies and transparency. This new banking culture will provide opportunities for success but the right processes, talent retention and robust management plans will be key to sustainably shifting the UK banks’ DNA and ensuring their competitiveness.
The new reality for reducing conduct risk: a cultural change
The Act (and its related secondary legislation) will apply for now to:
The main requirements set out in Part 4 of the Act are structured around the:
Key challenges: ready to navigate through?
Part 4 of the Financial Services (Banking Reform) Act 2013 will pose challenges across five dimensions for ensuring that an effective governance model within banks is being implemented. These five dimensions are:
Key next steps: ready to get started?
Banks should already start defining and following a robust management plan to ensure that an appropriate governance model is implemented. The general actions across banks for ensuring that their cultural DNA is shifting effectively should include:
Robust Management Plan for Shifting Banks’ Cultural DNAEnd-to-end governance, advisory and monitorship solutions to detect, mitigate, drive efficiencies and remediate operational, legal, compliance and regulatory risk.