U.K. Dumps `Guilty Until Proven Innocent' Rule for Bankersby and
New bill expands oversight within financial industry
Treasury says it's crucial to restore trust in banks
The U.K. government backtracked on a plan to assume senior managers of banks are guilty until proven innocent, substituting it with a “duty of responsibility” that will extend across the entire financial services industry.
Executives at U.K. insurers, mortgage brokers and payday-loan companies will be covered by the same requirements as those at banks under the Bank of England and Financial Services Bill introduced in Parliament Thursday, that will widen the scope of the Senior Managers and Certification Regime to cover the whole industry. The measure replaces the “reverse burden of proof” that would have forced senior executives to prove they were unaware of wrongdoing at their firms.
“A key part of the government’s long-term plan is to restore trust in Britain’s financial-services sector so that it works better for customers and businesses,” a Treasury spokesman said in an e-mailed statement. “Ensuring that these firms are properly run is vital for the health of our economy.”
The bill is designed to implement Bank of England Governor Mark Carney’s expanded remit. Carney is leading a push to clean up an industry tarnished by scandals such as benchmark rigging that also damaged the reputation of the central bank.
The new regime is due to come into effect in March 2016 and banks are in the midst of mapping out who is responsible for which areas and personnel.
“The introduction of the ‘duty of responsibility’ in place of the ‘presumption’ makes little difference to the substance of the new regime,” Andrew Bailey, the BOE’s deputy governor and CEO of the Prudential Regulation Authority, said in an emailed statement. “We strongly support this strengthening.”
Separately on Thursday, the PRA, part of the BOE, will publish a consultation paper on plans to ring-fence banks, another step in regulators’ efforts to prevent a repeat of the financial crisis. That move is aimed at ensuring that crucial financial services such as retail deposits and payments will be protected if riskier units incur losses and have to be shut down.