British financial regulators are moving to ease accountability measures that were established following the 2008 banking crisis. The Bank of England and the Financial Conduct Authority announced plans to reduce oversight requirements for financial services managers and streamline how misconduct is reported to supervisory authorities.
Under the revised framework, only the most senior executives—including chief executives and chief financial officers—will be required to demonstrate they are “fit and proper” to hold their positions on an annual basis and when moving to new roles. The changes would exempt approximately 140,000 managers from these enhanced vetting requirements. The senior managers regime, which was introduced in the mid-2010s and subsequently expanded across the financial services sector, was originally designed to address concerns that few banking executives faced consequences for actions contributing to the 2008 crisis.
The regulators also plan to modify reporting obligations for employee misconduct. Financial firms will no longer need to report initial warnings or minor infractions such as tardiness or missed calls. Instead, they will only be required to flag serious misconduct cases and instances where employees receive final warnings or termination. However, all initial misconduct matters will still need to be escalated to senior management.
Regulators estimate the changes will reduce compliance costs by approximately £2 billion over a ten-year period, while cutting the Bank of England’s annual expenses by £11.5 million and the FCA’s by £229 million. The regulators stated that individual accountability standards and conduct expectations will remain in place and that individuals will continue to be held responsible for misconduct affecting society and their employers.
This move represents part of a broader effort by the government to enhance the competitiveness of UK financial firms globally, following the removal of caps on banker bonuses that had previously limited compensation to twice an employee’s salary.
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