LONDON: A pioneering UK regime to stamp out misconduct by making bankers directly accountable for failings is working, the Bank of England said on Wednesday.
The senior managers regime, or SMR, was launched in 2016 to make senior bankers like CEOs, heads of units and directors personally accountable for failures on their watch.
It was called for by lawmakers after few bankers were brought to book in the global financial crisis a decade ago when taxpayers had to bail out lenders like Royal Bank of Scotland and Lloyds.
But bankers worried it would mean "heads on sticks" and make it harder to recruit senior staff. Lawyers say they are surprised that so few sanctions have been imposed under SMR.
Barclays' CEO Jes Staley was fined 1.1 million pounds in 2018 for attempting to mask a whistleblower, the first and still relatively rare case brought under the new regime.
The BoE's Prudential Regulation Authority said in its "myth busting" evaluation of SMR that most senior managers believe it has brought positive changes to behaviours, and clarified roles and responsibilities.
"Notwithstanding this broadly positive start, we are keen to continue to embed the regime, to ensure it is anchored in the need for good decision-making, and to ensure it remains a key tool for firms and regulators," BoE Deputy Governor Sam Woods said.
The regime was later rolled to insurers, will be expanded to investment firms, and other countries are considering introducing similar programmes.
The PRA said the initial nervousness that accompanied the introduction of the regime has reduced as practitioners have become familiar with it.
Executive pay is being adjusted in response to "adverse events", and the PRA said it wants industry feeback on the benefits of a more direct link between the regime and adjustments in pay, and improving diversity at financial firms.
It will also examine how to mention misconduct in regulatory references that aim to stop "rolling bad apples" or bankers sacked for breaking the rules but still able to work elsewhere in the sector.