British watchdog softens stance on personal liability
Junior non-executive directors at banks and insurers won’t be charged if they collapse
British regulators have exempted junior non-executive directors of banks and insurance companies from a tough new personal liability regime which could make them criminally liable for bank failures.
The Financial Conduct Authority (FCA), had originally planned to include all nonexecutive directors of banks and insurers in its new rules, after criticism that those running collapsed UK banks could not be held personally liable for their institutions’ demise.
Instead, the new regime, which will be introduced at a yet-to-be-announced date in 2016, will only apply to bank and insurance chairmen, senior independent directors and chairs of their risk, audit, remuneration and nomination committees.
As well as introducing personal criminal liability, the new regime includes FCA vetting of directors before appointment under a set of rules known as the Approved Persons Regime.
‘Unintended consequences’
The FCA said it had taken a decision to limit the scope of the new rules after accepting that there could be “unintended consequences” if all non-executives were subjected to onerous regulatory requirements.
“NEDs play a vital role in providing challenge to and an independent oversight of the executive directors. Including all NEDs in the new regime would risk the unintended consequence of changing the whole nature of this vital role,” said Martin Wheatley, chief executive of the FCA.
The volte face was a welcome reprieve for UK banks and UK subsidiaries of foreign lenders, which are covered by the regime and have been facing increasing regulatory scrutiny.