here - Chartered Banker: Professional Standards Board

Chartered Banker Professional Standards Board
Response to Consultation Paper FCA CP14/13/PRA CP14/14
Strengthening accountability in banking: a new regulatory framework for
individuals
1. The Chartered Banker Professional Standards Board (CB:PSB) welcomes the
opportunity to respond to Consultation Paper FCA CP14/13/PRA CP14/14
Strengthening accountability in banking: a new regulatory framework for
individuals. The views expressed are those of the CB:PSB and do not necessarily
represent the views of individual CB:PSB member firms who may be submitting their
own responses.
2. Launched in October 2011, the CB:PSB is a unique initiative, led by eight1 UK banks
and the Chartered Banker Institute, to enhance and sustain professional and ethical
standards in banking in the UK. The CB:PSB’s member firms encompass
approximately 75% of the UK banking workforce. Our aim is to develop and
implement professional standards (standards of conduct and expertise) for individual
bankers which will contribute to the restoration of public trust and confidence and
promote a culture of professionalism in the banking industry. Membership of the
CB:PSB is open to any bank operating in the UK.
3. In October 2011, the CB:PSB published the Chartered Banker Code of
Professional Conduct (Chartered Banker Code) which sets out, as high level
principles, the ethical and professional values, attitudes and behaviours expected of
all bankers. Banks supporting the CB:PSB subscribe to the Code and have
implemented and embedded the Code’s principles in their organizations.
4. To be able properly to recognise and apply the ethical and professional values,
attitudes and behaviours set out in the Code in their daily professional activities,
individuals must have gained the requisite levels of professional and technical
competence relevant to their role. The CB:PSB is therefore developing, and
supporting the implementation of, industry-wide professional standards which set out
the knowledge, skills, values, attitudes and behaviours expected of all bankers. One
way in which individuals can demonstrate that they have the knowledge and skills to
perform their role is through the achievement of relevant vocational or professional
qualifications. In order to achieve a CB:PSB professional standard, however,
individuals must also demonstrate that they continuously exhibit the customer- and
client-focused ethical attitudes and behaviours set out in the Code.
5. In July 2012, the CB:PSB launched its first standard, the Foundation Standard for
Professional Bankers (the Foundation Standard). As at the end of 2013, 73,000
individuals had met the Foundation Standard. The numbers are increasing and the
CB:PSB member firms have committed that 200,000 individuals, including all
customer-facing staff, will have met it by the end of 2015.
1
Barclays , Clydesdale and Yorkshire Banks, HSBC Bank , Lloyds Banking Group, Royal Bank of
Scotland, Santander UK, Tesco Bank, Virgin Money.
Chartered Banker: Professional Standards Board
Chartered Banker Institute is a trading name of
The Chartered Institute of Bankers in Scotland: Charitable Body No SCO013927
Drumsheugh House
38b Drumsheugh Gardens
Edinburgh EH3 7SW
Telephone: +44(0)131 473 7792
Fax: +44(0)131 473 7788
Email: [email protected]
Web: www.cbpsb.org
6. On 30 September 2014 the CB:PSB launched its second standard, the Leadership
Standard for Professional Bankers (the Leadership Standard). It is aimed at
professional bankers, throughout an organisation, with leadership responsibilities for
shaping the strategy, policy and culture of our banks. Developed by senior bankers
with critical input from our independent Advisory Panel and shaped by public
consultation, the Leadership Standard sets, for the first time, detailed expectations
for the conduct and expertise of banking leaders.
7. There is no doubt that the ‘tone from the top’ is of great consequence, but the
CB:PSB believes that the ‘tone in the middle’ is equally important. We believe,
therefore, that this Standard should be applied to banking leaders and managers
throughout organisations, and the accompanying Guidance to the Leadership
Standard makes this clear. As a result, its application is expected to include those
who fall within the Senior Manager and Certification Regimes.
8. The Foundation Standard will be reviewed in 2015 and will be enhanced, if
appropriate particularly in regard to market conduct, to align with the behaviours
expected by the PRA, FCA, and customers and clients, and the final regulatory rules.
The Leadership Standard will also be reviewed and revised, if necessary, when these
requirements are finalised.
9. The CB:PSB publishes an Annual Report which includes metrics about those who
have achieved the standards as well as statistics on public confidence and trust,
public and industry awareness and professional pride.
10. The CB:PSB board believes that its work complements that of the PRA, FCA and the
emerging Banking Standards Review Council (BSRC).
QUESTIONS
11. We have commented only on those questions which fall within the CB:PSB’s
mandate and area of expertise.
Q17: [FCA]: Do you agree with the FCA’s proposed approach to rules and
guidance on fitness and propriety?
12. The CB:PSB agrees that firms must take responsibility for the fitness and propriety of
their employees and that firms should establish that candidates for Senior Manager
or certification functions are fit and proper to perform the role. The CB:PSB also
supports the requirement for firms to assess the fitness and propriety of those
undertaking these roles at least annually. To ensure consistency we would
encourage the regulators to consider an on-going role in informing assessments of
fitness and propriety.
13. We note:
 the change to FSMA that requires firms to have regard to any general rules the
regulators have made around qualifications, training, competence and personal
characteristics required by an individual in that role; and the intention of the FCA
not to make new rules relating to these sections of FSMA; and
 that changes are to be made to the guidance in the FCA’s FIT Handbook so that
its application and relevance for firms assessing the fitness and propriety of both
Senior Managers and those within the Certification Regime is readily apparent.
Chartered Banker: Professional Standards Board
Chartered Banker Institute is a trading name of
The Chartered Institute of Bankers in Scotland: Charitable Body No SCO013927
Drumsheugh House
38b Drumsheugh Gardens
Edinburgh EH3 7SW
Telephone: +44(0)131 473 7792
Fax: +44(0)131 473 7788
Email: [email protected]
Web: www.cbpsb.org
14. The CB:PSB believes that its Leadership Standard complements the proposed
approach and could be used by firms as a relevant, but not determinative, factor in
addition to the FCA’s FIT Handbook guidance, in assessing and demonstrating the
fitness and propriety of applicants for, and holders of, SMFs, as well as individuals
falling within the Certification Regime prior to their appointment and on an on-going
basis.
15. In particular we believe that the Leadership Standard could be a relevant factor to
assist firms in assessing the competence and personal characteristics of an
individual covered by the Senior Managers and Certification regimes. Widespread
adoption of the Leadership Standard across the industry would ensure a common
approach which, in our opinion, would assist the regulators when judging firms’
compliance with their fitness and propriety duties.
16. The CB:PSB member firms are committed to commence implementation of the
Leadership Standard in 2015 which we believe may assist firms in meeting the
timescales for implementation of the Senior Managers and Certification Regimes.
Q21: [FCA]: Is this the best possible definition of scope that fulfils the objectives
set out in paragraph 5.11? Are there alternatives that would better meet these
objectives?
Q22: [FCA]: Do you believe that rules should apply to all people in the firm who
are directly involved in financial services business?
Q23: [FCA]: Are there any functions that you believe should be added or removed
from the list at 5.13 because they are roles that are, or are not, the same as roles
performed by those working in non-financial services firms?
17. There are a number of roles in the list where the individuals are likely to come into
contact with customers and clients and/or may have access to confidential
information (e.g. personal assistants, secretaries, chauffeurs). Customers, clients
and colleagues would expect them to adhere to the same standards and be part of
the cultural change within both firms and the financial services sector. Being bound
by other provisions, such as the Data Protection Act, is not on its own sufficient
justification for not being bound by the Conduct Rules.
18. The CB:PSB’s experience with implementing the Foundation Standard shows that it
is possible to include some of the proposed ‘out of scope’ roles and we would
encourage the FCA to review paragraph 5.13. It may be appropriate to allow firms
some limited flexibility in the roles that are out of scope.
Q24: [PRA & FCA]: Do you agree that these are the right Conduct Rules for both
regulators to introduce, taking into account the objectives set out in paragraph
5.16?
Q25: [FCA]: Do you agree that these are the right additional FCA-specific rules?
19. The CB:PSB agrees that these are the right Conduct Rules for Individuals and Senior
Managers. In both cases, we believe that the Chartered Banker Code aligns with
these, and the CB:PSB Standards can support banks and individuals in
understanding what is expected of them and implementing the letter and spirit of the
new Conduct Rules.
Chartered Banker: Professional Standards Board
Chartered Banker Institute is a trading name of
The Chartered Institute of Bankers in Scotland: Charitable Body No SCO013927
Drumsheugh House
38b Drumsheugh Gardens
Edinburgh EH3 7SW
Telephone: +44(0)131 473 7792
Fax: +44(0)131 473 7788
Email: [email protected]
Web: www.cbpsb.org
20. To be effective, the Conduct Rules need to be integrated into firms’ policy,
procedures and operations. The CB:PSB member firms have aligned their own
internal codes of conduct, or similar, to that of the Chartered Banker Code. To be
able properly to recognise and apply the ethical and professional values, attitudes
and behaviours set out in the Code in their daily professional activities, individuals
must have gained the requisite levels of professional and technical competence
relevant to their role. The CB:PSB Professional Standards support individuals and
organisations in applying the Chartered Banker Code and we believe would support
them in applying the Individual and Senior Manger Conduct Rules. Wider adoption of
the CB:PSB Standards would potentially help the regulators make judgements on
how deeply a firm has embedded the Conduct Rules into its business.
Q26: [FCA]: Does the guidance attached at Annex 6 give helpful clarity on the
behaviours the FCA expects under each of the rules?
21. The rules are of course written at a high level of generality and the CB:PSB
understands why the guidance in Annex 6 has been drafted as a non-exhaustive list
of examples of conduct that would be in breach of the rules. It is important, however,
that firms and their staff are aware of, and understand, ‘what good looks like’.
22. In respect of the Conduct Rules for Individuals, the CB:PSB Foundation Standard,
which applies across a large population and a wide range of jobs, does this, in our
view, by setting out the conduct and expertise required, relevant to role, function and
organisation. Similarly, the Leadership Standard, in our view, fulfils this role in
respect of the Conduct Rules for Senior Managers.
23. In its assessment, the CB:PSB would encourage the FCA to consider a firm’s
evidence that a) it has aligned its own internal code of conduct, or similar, to that of
the Chartered Banker Code and b) its staff are meeting the Foundation Standard
and, where applicable, the Leadership Standard as part of their evidence that the
new Conduct Rules have been implemented and continue to be adhered to. The
standards set clear benchmarks against which colleagues, customers, clients and
others can measure bankers’ professional competence.
24. Member firms work within broad guidelines to determine how the CB:PSB’s
professional standards are implemented within their organisations. This approach
ensures that implementation is aligned to banks’ development, competency and
performance frameworks. It is the responsibility of each member firm, with the
support of the Chartered Banker Professional Standards Team, to define a
sustainable and effective approach to implementing the Standards within their
organisation, consistent with the guidance provided.
25. Monitoring of implementation of the CB:PSB Standards comprises two elements:
 Member firms are required to establish an Internal Monitoring Team comprised,
for example, of internal audit, compliance, HR or risk functions to monitor
compliance with CB:PSB professional standards on an annual and on-going
basis. As well as ensuring compliance, monitoring helps identify best practice
which can be shared across member firms. The Internal Monitoring Team is
expected to ensure that implementation and achievement of professional
standards is carried out correctly and consistently. In addition, member firms, in
many cases through their internal monitoring and conduct risk teams, monitor the
day to day activities and behaviours of individuals. Where individuals’ behaviours
fall short of those expected by the CB:PSB, member firms are required to have
systems and processes in place to identify these and, where appropriate,
withdraw the achievement of a standard(s); and
Chartered Banker: Professional Standards Board
Chartered Banker Institute is a trading name of
The Chartered Institute of Bankers in Scotland: Charitable Body No SCO013927
Drumsheugh House
38b Drumsheugh Gardens
Edinburgh EH3 7SW
Telephone: +44(0)131 473 7792
Fax: +44(0)131 473 7788
Email: [email protected]
Web: www.cbpsb.org
 Member firms are required, annually, to take part in an implementation progress
review which comprises a self-evaluation completed by member firms’ Internal
Monitoring and Implementation Teams, and an external review completed by the
Professional Standards Team. Further details can be found in Appendix 1.
Q30: [PRA & FCA]: In relation to the Conduct Rules, how much time do you think
is necessary for implementation? Please explain what activities would be required
to prepare for implementation, and the time required for each activity.
26. The practical experience of the CB:PSB and its member firms in implementing the
Foundation Standard, which in many respects is similar to the new Conduct Rules for
individuals, indicates that planning and preparation takes at least 6 months. In the
case of the Foundation Standard, many member firms also undertook a pilot to trial
implementation. A further period of at least 12 months is required to get large
numbers of staff through the systems and processes to demonstrate that they have
met the standard, if this is to be meaningful and not simply a ‘tick box’ approach. It is
important that implementation is aligned with the annual performance appraisal cycle
and systems if the Conduct Rules are to be embedded as ‘business as usual’ rather
than a one-off exercise.
27. The timetable from launch of the Foundation Standard was:
FROM JULY 2012
Benchmarking – having set targets, member banks completed
comprehensive benchmarking of their target populations against the 30
knowledge, skill and performance indicators of the Foundation Standard. This
involved assessing existing learning and development, on-the-job training and
coaching, performance management and competency frameworks against the
Foundation Standard. If gaps were identified, member banks had to develop
learning solutions to address them.
FROM AUGUST 2012
Development of implementation plans based on target populations –
member banks created plans for how they would implement the Foundation
Standard. Banks were required to establish internal working groups or similar
to drive and coordinate implementation, develop robust project methodology
including identifying slippage, risks and issues and identify how
communication would be developed and deployed to the target group and
wider organisation.
OCTOBER AND NOVEMBER 2012
Critical Evaluation – each bank completed a progress review, which was
independently assessed by the Chartered Banker Institute.
NOVEMBER 2012 TO JUNE 2013
Testing and embedding – following Critical Evaluation, the banks worked to
remedy issues identified – this included, among other activities, banks developing
greater rigour in their implementation plans, augmenting training and assessment
for their target group and refining benchmarking. To June 2013, the Chartered
Banker Institute continued to work closely with each member bank to ensure their
respective plans were being implemented successfully.
Chartered Banker: Professional Standards Board
Chartered Banker Institute is a trading name of
The Chartered Institute of Bankers in Scotland: Charitable Body No SCO013927
Drumsheugh House
38b Drumsheugh Gardens
Edinburgh EH3 7SW
Telephone: +44(0)131 473 7792
Fax: +44(0)131 473 7788
Email: [email protected]
Web: www.cbpsb.org
JULY 2013
Initial 70,000 target met – member banks confirmed that 70,000 bankers had
progressed through the systems and processes to meet the Foundation Standard.
JULY TO AUGUST 2013
Independent review – a three stage review completed by member banks and
the Chartered Banker Institute
SEPTEMBER 2013
Additional roll-out – following the CB:PSB’s success in implementing the
Foundation Standard to the initial target group, the Board committed that
200,000 individuals, including all customer-facing staff, will have met it by the
end of 2015.
28. The Conduct Rules should, in our view, apply to all personnel from a common date
otherwise there is the potential for “Conduct Level Variances” which might impede
the effective cascade throughout an organisation. Based upon practical experience
of implementation of the Foundation Standard, a minimum period of 6 months will be
required for planning and preparation between publication of the final rules and the
initial commencement date. The CB:PSB believes that firms will require a minimum
of 12 months after initial commencement of the rules to train Senior Managers,
those that come within the Certification Regime and all other in-scope staff.
Validation and recording of adherence to the Conduct Rules is essential and we
would strongly recommend that the start of implementation period is aligned with the
performance appraisal cycle.
Chartered Banker: Professional Standards Board
Chartered Banker Institute is a trading name of
The Chartered Institute of Bankers in Scotland: Charitable Body No SCO013927
Drumsheugh House
38b Drumsheugh Gardens
Edinburgh EH3 7SW
Telephone: +44(0)131 473 7792
Fax: +44(0)131 473 7788
Email: [email protected]
Web: www.cbpsb.org
Appendix 1
Annual Progress Review
In addition to internal monitoring of professional standards implementation, member firms
are required to take part in a progress review of implementation conducted annually by the
Professional Standards Team of the CB:PSB.
The progress review comprises a self-evaluation completed by member firms’ Internal
Monitoring and Implementation Teams, and an external review completed by the
Professional Standards Team:
Self – Evaluation
Step
1
Step
2
Step
3
A designated member of the Implementation Team (Implementation Lead) completes
a survey which evaluates the organisation’s commitment and strategic approach,
implementation of professional standards, monitoring and enforcement activity and
support for the CB:PSB’s overarching aims. The survey may be ‘themed’ in specific
areas to focus on areas of strength or weakness to support effective embedding of
professional standards.
The Internal Monitoring Team critically evaluates the survey, independent of the
Implementation Team, to assess its accuracy.
The Implementation Lead, a representative from the Internal Monitoring Team and an
authorised senior executive sign the completed survey confirming its content, and
submit the survey to the Professional Standards Team.
External Progress Review
Step
4
Step
5
Step
6
Step
7
Step
8
Step
9
The Professional Standards Team review the completed survey and advise the
member firm of supporting evidence required. Evidence may be from organisational
and/or individual sources.
The Professional Standards Team conducts a site visit to each member firm to
review supporting evidence, and sample data to verify individuals have met the
requirements of the standard.
The Professional Standards Team produce a detailed written report (Draft Report)
for each member firm, highlighting any development areas and potential risks, and
issue to the member firm.
The member firm and Professional Standards Team discuss the Draft Report and
where development areas and risks have been identified, action plans are jointly
agreed to support member firms in implementing professional standards.
The Professional Standards Team issue an agreed Final Report to the member
firm.
A summary report, setting out member firms’ performance against the CB:PSB’s
aims is prepared by the Professional Standards Team and circulated to the
CB:PSB Board and its Advisory Panel. The summary report describes the extent to
which the CB:PSB’s aims have been achieved, areas of good practice and
highlights common deficiencies through action planning.
Chartered Banker: Professional Standards Board
Chartered Banker Institute is a trading name of
The Chartered Institute of Bankers in Scotland: Charitable Body No SCO013927
Drumsheugh House
38b Drumsheugh Gardens
Edinburgh EH3 7SW
Telephone: +44(0)131 473 7792
Fax: +44(0)131 473 7788
Email: [email protected]
Web: www.cbpsb.org