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PCBS? …Yes

The BoE and FCA have published their responses to the final PCBS report. They are united in welcoming the report and in emphasising how many of its recommendations they have already implemented.  A brief summary of the report and responses follows;

People: BoE pledge the support of the PRA in assigning key risks to Senior Persons including the CEO and expect to enact the final rules in 2014 for implementation in 2015.FCA supports the proposal and enumerate details such as pre-approval of Senior Persons by themselves.

Pay: FCA supports the wider recommendations re. deferred pay and will work with the PRA in 2014 with respect to required changes in the Remuneration Code. FCA does not agree that the remuneration code should apply beyond “Material Risk Takers”

Punishment: FCA supports the proposal that in the event of successful enforcement, Senior Persons must demonstrate that “they took all reasonable steps to prevent or mitigate “a particular failing. It also agrees with an increase from three to six years in the time that the regulator has to investigate an alleged offence.

Governance: BoE support the PCBS recommendations on corporate governance and risk management, and expect to consult on these in 2014. FCA (unsurprisingly) agrees that “the Boards must be responsible for managing the risks within their organisations”, emphasise the role of non-exec directors as a counter-balance to the executive. The FCA also supports the PCBS proposals with respect to whistleblowing and will consult in 2014 as to minimum whistleblowing standards.

Auditing: PCBS recommends regular meetings between bank auditors and the regulators. The PRA responded that these are already taking place for the four largest banks and that a report on regulator-auditor dialogue quality is due in June 2014. The PCBS also recommended that banks prepare a separate set of accounts for regulators. The PRA responded that they are assessing this initiative in conjunction with the reporting requirements laid down by CRD IV.

In summary and as expected- very few surprises.  However, the responses do represent the next incremental step in the creation of a new regulatory environment. It looks set to be a quite different from the cosy self-regulated club of the past.

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