Overseas banks will come under greater scrutiny in the UK.
When governing the conduct of UK banks, the Financial Conduct Authority (FCA) and its predecessor the Financial Services Authority have found many reasons to be critical of banking practices in the UK, with this leading to a myriad of regulatory changes in recent years.
However, while British financial institutions have been busy making changes to avoid the problems of the recent past, there has been one potential area that could be overlooked; that of foreign banks that have UK outlets.
Recognising this danger, the Treasury has launched a consultation on proposals to extend its new, more rigorous regime of standards to these foreign banks. It would mean bodies like the FCA would be able to fine or impose other sanctions on senior managers at such banks.
The Senior Managers and Certification Regime for UK banks was part of the Banking Reform Act in 2013, but at the time it only applied to British institutions. However, chancellor George Osborne announced in his June 2014 Mansion House speech that the government wanted this to apply to all banks operating in Britain, whether UK-based or not.
Economic secretary to the Treasury Andrea Leadsom commented: “A key part of our long term economic plan is to strengthen Britain’s banking sector so that it works better for customers and businesses. Ensuring that our banks are properly run is vital for the health of our economy.
“As this consultation makes clear, the government is determined to tackle unacceptable behaviour by holding senior bankers fully accountable. We are determined to make sure that all banks in Britain operate with the highest standards.”
This is the kind of measure that may prove very popular politically and chime well with the public, not least with an election approaching. Moreover, as well as the government being seen to do something about a potential problem, it also would mean in practice that no overseas bank could see the UK as a place where they could operate under soft touch regulation.
After all, if such laxity was to apply, many foreign banks might consider Britain a place where they could act using practices not allowed in their own countries, where governments will have implemented their own stiffer regulatory regimes.
For overseas banks, now may be a good time to seek to recruit workers who are skilled in understanding the UK banking system and the regulations now in place. This will help foreign banks adjust to the specific regulatory requirements of the country as it applies already to Uk banks. Working with a specialist financial jobs recruitment agency may be an invaluable step in finding the people with the requisite skills and knowledge.
The consultation document was published yesterday (November 17th) and the period for submissions will end on January 30th next year. During this time, the submissions made by foreign banks and others may end up changing the details of the forthcoming legislation in some respects, but there can be little doubt that the final outcome will be the government taking measures to ensure senior managers of overseas-based institutions keep on their toes.