For those unfamiliar with this regime, it applies in the UK and came into effect in 2016, in an effort to bring about a change of culture in the banking industry. All are in agreement that it was a somewhat necessary implementation given the behaviours that the market had been subject to by some "bad apples" but, as someone with firsthand experience of the consequences, I know that it has been detrimental to older and more experienced staff.
Under the senior managers regime, individuals with a senior manager designation are subject to lengthy investigations of their 'fitness and propriety' which need to be affirmed annually, and can be personally liable for breaches of FCA requirements that take place within areas for which they are responsible. This is as particular issue in tier two institutions like my own, where the senior manager designate is generally running a smaller team across a larger number of asset classes. This can result in managers being made responsible for entire businesses even though they literally have no clue nor experience as to how they operate or to the underlying dynamics of the product / market.
I know from firsthand experience, therefore, that being a senior manager designate can be a source of considerable stress and can lead to an overly conservative approach to running a business and staffing. The risks are simply too high: it's all about self-preservation. I've seen various people being let go as senior managers simply refuse to sign-off staff members as approved persons under the regime for fear of the personal liabilities that may result. - In one case, for example, a member of staff at a bank I know of missed a compliance training "Refresher course" and was subsequently deemed not fit and proper to continue in their roles.
Yes, the FCA and PRA have issued some perfunctory statements about the senior managers regime during this crisis, but the fear is still that any small misdemeanours will be treated with mimimal tolerance. The regulations have been written in a very loose manner, and signing off an approved person about whom you have any doubts whatsoever is highly risky. Corporate behaviours are increasingly in the spotlight, and no one wants to be exposed to the risk of retribution. I know that a lot of people will be even less willing than before to sign off approved staff over whom they have even minor doubts - and this will lead to experienced people being let go unnecessarily.
Nor is the regime all good news for junior and mid-ranking staff. Because of the complex process for designating a senior manager, I know of a lot of older staff who are being kept on simply because it's too challenging to find an alternative. This is blocking the potential for others to move up.
As everything around us changes, this is an opportunity to reflect. And the senior managers regime is one area that greatly needs consideration.
Shane Vendrell is the pseudonym of a senior manager in Europe
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