How is SM&CR working in banking? This week in regulation


The speed read

  • How is SM&CR working in the banking sector?
  • There’s new FCA data on skilled persons reports from the start of the year
  • It’s time for those at the top to take responsibility for AI
  • The FCA has launched an investigation into a private client broker

How is SM&CR working in the banking sector?

There are new findings from the regulator on how the SM&CR is being embedded in the banking sector.

The FCA wanted to understand how SM&CR has worked in the sector since it came into force in March 2016 and if there are issues that need greater attention, from firms or the FCA itself.

Overall, it found that the industry has made a real effort to implement SM&CR. The regulator reports that plenty of firms have moved away from rules-based compliance, and instead are focused on embedding the regime holistically into the organisation, supported by a positive, customer-centric culture.

The FCA included a range of themes in the report, including:

  • Senior manager accountability
  • Certification
  • Regulatory references
  • Conduct rules
  • Impact on culture
  • Unintended consequences
  • Embedding and overcoming initial implementation issues.

The next steps for the regulator are to increase its supervisory focus on compliance with the conduct rules of SM&CR, as it found that staff training around the rules isn’t always tailored to specific job roles. Not all firms had mapped the conduct rules to their organisation’s values, and many firms could not explain what form a conduct breach could take in the context of their business.

The FCA also said it would further build the links between the new regime and organisational culture, in line with its cross-sector business priorities.

The sectors currently implementing the next stage of SM&CR can learn from those areas which need improvement in the banking sector. Are you ready for submission to the SM&CR portal opening on 9th September? Join our latest webinar for the practical guidance you need.


There’s new FCA data on skilled persons reports from the start of the year

The FCA has released new data on the number of skilled persons reports in Q1 of 2019. There were nine reports commissioned in total: three each in retail lending and wholesale financial markets, two in general insurance and protection, and one in retail banking.

Three of the reports fell into Lot E – financial crime, with two reports each in Lot B – governance and individual accountability, Lot C – controls and risk management frameworks, and Lot D – conduct of business.

Read Don Scott’s insights into the FCA’s focus when it comes to skilled persons reviews.


It’s time for those at the top to take responsibility for AI

In an article for FCA Insight, senior adviser Magnus Falk argues that artificial intelligence (AI) and its associated issues are not just the responsibility of IT departments and technicians. He makes the case that boards and senior executives need to learn to manage the major challenges around AI, such as ethical considerations, accountability and transparency.

Senior individuals will need both the confidence and integrity to admit when they don’t understand the full functionality and implications of the AI being used. They will need to take steps to ensure they have a comprehensive understanding of the issues surrounding its use.

Falk warns that the time for senior managers to consider these issues is rapidly approaching, with the era of AI already on our doorstep.


The FCA has launched an investigation into a private client broker

A private client broker has entered administration after the FCA took action against the firm. The regulator acted on intelligence about the nature of the assets in which the broker invested its clients’ money. The FCA carried out urgent work and found serious concerns about how the business was operating.

As a result the regulator has stopped the firm from conducting regulated activities and launched an investigation.

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