A joint consultation, “Strengthening Accountability in Banking: A New Regulatory Framework For Individuals” has far reaching implications for bankers.

The consultation takes into consideration the recommendations published by the Parliamentary Commission on Banking Standards (PCBS) in its June 2013 report Changing Banking for Good and answers the requirements of the Financial Services (Banking Reform) Act 2013.

At the same time, a second joint PRA/FCA consultation seeks to instigate new remuneration rules that will tie reward with long term results, helping to rein in harmful risk-taking behaviours.

The three key changes highlighted as crucial are the introduction of a “Senior Managers Regime”, a “Certification Regime” and a new set of overarching “Conduct Rules”.

Under the new “Senior Managers Regime”, accountability will fall on the shoulders of fewer senior individuals. Relevant firms will be required to provide a formal Statement of Responsibilities for board members, executive committee members and other influential individuals, who must receive regulatory pre-approval.

Under the new “Certification Regime” banks will be required to access and certify on an annual basis that employees are “fit and Proper” to perform roles. Staff working in customer-facing roles which are subject to regulatory qualification requirements, such as retail investment advisors, will also be under this scope.

Perhaps most far reaching are the “Conduct Rules”. All those affected by either the Senior Managers Regime or the Certification Regime must adhere to the new rules. In addition, the FCA will extend the Conduct Rules to the majority of employees based in the UK or dealing with UK based customers.

The proposals aim “to create a new framework to encourage individuals to take greater responsibility for their actions, and will make it easier for both firms and regulators to hold individuals to account”.

The fact that the rules are enforceable serves as a deterrent to those who might otherwise ignore or overlook them. Firms are obliged under the Act to make all individuals subject to the Conduct Rules aware of them, and train them in how they apply to their specific case. Firms must report any breaches of the Conduct Rules, or suspicions of such, to the regulators. If a firm takes disciplinary action against an individual, because of a breach, this must be reported too.