UK Regulators Toughen Vetting Process for Senior Financial Services Roles
People put forward for chief executive, chairman and for a handful of other senior roles in banking now face a more grueling interview by British financial watchdogs.
This increased scrutiny also follows weaknesses in vetting exposed by problems at the Co-Op Bank, where the former chairman, Paul Flowers, was waved through in 2010 despite disclosing a criminal conviction and later showing little knowledge of banking.
The country’s two financial regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), have not rejected any candidates since the watchdogs were set up in April 2013. But 22 people have withdrawn out of 186 applications that were processed for the most senior positions, based on freedom of information data provided to Reuters and published data.
Rejections are rare because the regulators will notify prospective employers if candidates fall short of requirements, which will typically prompt the person to withdraw before they are interviewed for fear that failure will stall their career.
“For some people it can be their first exposure to the UK regulators, and it can be a challenging experience,” said Sam Tymms, managing director at Promontory, which advises financial firms on regulatory and compliance matters.
“If they are not granted approval they can’t take the role and that can have career implications.”
People who have been through the 90-minute interviews conducted by the two watchdogs have described them as challenging, intense and uncomfortable.
“I knew that getting my job depended on getting through it. It’s funny how that can focus the mind,” one senior executive said.
Once a bank, insurer, hedge fund or other financial firm picks who it wants for a senior role, it puts the candidate forward for regulatory approval. The interview is typically with three to seven people from either the PRA and FCA, or both.
Interviews, also held for senior finance, risk, compliance and audit roles, have become more forward looking with more focus on culture and conduct, sources familiar with the process said. Topics are wide-ranging, and candidates will also be grilled on strategy, leadership, markets, regulation, risk, capital, tax, technology and cyber security.
A candidate’s history will often come up and if they or their firm were involved in any of the recent mis-selling scandals they are asked what they would do differently.
Candidates for non-executive roles are likely to be tested on governance and how they would challenge a board, as well as broad details about the business.
Senior industry figures, dubbed ‘grey panthers’ to reflect their experience, can be drafted in to sit in on interviews on top appointments, as can experts when there is a strong focus on liquidity, technology or financial crime, for example.
New rules coming in next year to make senior bankers in Britain more accountable for their actions could see more people go through the interview process. The PRA has said it intends to interview a higher percentage of candidates under these rules, known as the senior managers’ regime, than currently.
The PRA interviewed 60 people last year as part of its approval process, and four of the candidates withdrew their applications, according to data provided to Reuters. For the nine months it existed in 2013, the PRA interviewed 45 senior candidates, and two withdrew.
The FCA said 16 people withdrew out of 103 applications for the most senior position in the year to March 2014. Another 22 of the applications were still under assessment. The FCA declined to provide more recent data for senior staff and said they will be publicly released soon.
For more junior positions, the data showed almost 600 people had withdrawn applications since April 2013 out of more than 47,000 applications, although that marked a reduction in the percentage of people withdrawing compared to previous years. (Editing by Jane Merriman)
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