7th March 2016
Senior managers in UK banks could now face seven years in jail or an unlimited fine if their actions cause their institution to fail.
The new legislation goes live from Monday 7 March, has been described by the government “a major milestone” in its efforts to reform UK financial services.
Under the new law, senior managers in UK banks, building societies or systemically important investment firms will have committed a criminal offence if:
The Chancellor of the Exchequer, George Osborne, said: “This government has learnt the lessons of the past.We have reformed Britain’s banking regulation to help build a stronger and safer financial system and introduced new rules that mean individuals working in UK firms face some of the toughest sanctions in the world.
“The new criminal offence, which becomes law today, is the latest milestone in my plan to ensure that the British banking industry operates to the highest possible standard.
“It is absolutely right that a senior manager whose actions causes their bank to fail should face jail.”
Also coming into force is the new Senior Managers and Certification Regime (SM&CR). It will apply to banks, building societies, credit unions and PRA-regulated investment firms and replaces the existing Approved Persons Regime for deposit takers and investment banks.
The SM&CR will focus regulatory prior approval on the key people at the top of these firms with “statements of responsibility” for each senior manager which will mean they have nowhere to hide if their firm breaches regulatory requirements.
The SM&CR will also shift responsibility for ensuring key staff below senior management levels are fit and proper to the firms themselves – there will be no prior regulatory approval of these staff.
There will also be more flexibility to enable regulators to impose high standards of conduct on a wider range of staff in these firms, including individuals doing jobs for which prior regulatory approval is not required.