Twin Peaks... the reality
The last few weeks has seen Martin Wheatley's launch of 'The journey to the FCA' and Andrew Bailey's announcement on 'The future of banking regulation in the UK'. At the same time an independent report on the new twin peaks model has been issued providing the fs industry's views on upcoming regulatory issues, and we've been talking to clients about their current reality.
Martin Wheatley advised in his speeches that fewer firms will have direct contact with a supervisor and yet spoke of encouraging 'staff to be more confident in making bold, firm and predictable decisions' and wanting staff 'talking to CEOs of firms...to find out where the business is going...' It will be interesting to see how that pans out without actually having direct contact with a firm, or maybe regulation will become more tiered by size of firm?
According to the Twin Peaks research the industry supports the new regulatory approach and just wants to get on with it. The respondents have most concerns over the increased powers over new products, etc.
We've also been keeping our fingers on the pulse with client firms around their issues and the shape of ARROW and Themed visits they are experiencing now. The feedback we're getting from retail firms is that not much has changed yet, but it's making things clearer and there definitely seems to be a lot of detail for individual firms that's not yet been formulated unsurprisingly. Looking at mainly wholesale firms, they are finding that the conduct teams don't seem to know what questions to ask. There also seems to be a big discrepency between the regulators' reading of 'consumer' and everyone else still understanding it to mean 'the retail public'. Co-ordination between the FCA and PRA is not yet apparent to firms and much time is being needlessly expended in duplicating effort as a result. The reality will be that firms will need to communicate far more to their regulator/s, both in terms of depth and range of material to and from the FCA and PRA. Will current Compliance resources really be enough?
Once the legislation is enacted and the rules issued the key to the success of whatever the regulators and industry is handed will be adequate training of regulators in particular, good communication to and from regulators, and as ever the devil will be in the detail.
Bank of England to gain overseas governor
It's a big step in the history of the bank to have an outsider and a foreigner to boot. A clever move and perhaps the only one that could have been made in the circumstances there having been so much said about accountability and the need to modernise. The new Governor, Mark Carney of the Bank of Canada, comes highly respected internationally. One to watch.
UBS systems and controls failings
This case has been particularly high-profile due to the size of the fine and the public trial of the trader involved. This is not the first time a firm has sent out mixed messages to those who make millions for a business. How confusing to be first congratulated and then only as a by the by a brief admonishment for failure to adhere to the inadequate controls in place. In this case there had been perhaps 3 or more previous incidents for the trader when senior management had sent mixed messages. Also, typical for many firms, traders are 'gods' who must be supported in creating revenue, rather than disturbed or impeded in any way and so the relationship between front and back office is therefore inappropriate from a risk management persepective. There may be more than a few firms reviewing their controls and the relationship between front and back office now.
Board diversity in the headlines again
We've recently seen the ruckus over the all-male ECB board and the failure of the EU to gain formal quotas on Boards. The good news is that perhaps now the subject is firmly embedded in people's psyche everyone can just get on with appointing the best person for the job, but be mindful of casting the net in uncommon waters where there may be a stronger likeihood of finding a very able female.
I come across some fantastically gifted women in senior management when conducting interviews for Board evaluations. They would make great NEDs when they're ready and it would add a dimension to their existing Board role. When I occasionally suggest adding a NED role at some point because they are exceptionally talented the response I invariably receive is 'suitable, really, do you think so?' I wonder if that's because these women are just getting on with their job or maybe they just don't appreciate their own skills?
Board CPD programme 2012-13
On 26 November we ran a briefing on the Board's Role in Overseeing Risk Management for a packed room of senior executives. For those of you who missed this event a further session will be held in the Spring. Our next briefing is on Responsibilities of Approved Persons in SIF Roles.
The forthcoming programme is:
Responsibilities of Approves Persons in SIF Roles - 6 December
Better Board Reporting - 10 January (full, new date TBC)
Developing Successful Strategies - 13 February
Culture and Ethics - 27 February
The New Regulatory Framework - 12 March
Good Governance - 26 March
Board Evaluations - 10 April
Risk Management Oversight - date TBC
For further information visit here.
Until next time...
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