Potential applicants to leadership positions in financial services could be deterred by Britain’s strict personal accountability regime for senior management, regulatory consultancy Bovill has warned.
As the Financial Conduct Authority’s (FCA) consultation on extending the senior managers and certification regime to financial services firm draws to a close, Bovill found that over a third of senior managers across the UK, Singapore, Hong Kong and the US believe high levels of personal accountability will make it hard to make positions enticing to the next generation of leaders.
“Alongside the increased scrutiny, there is the potential for mistakes and errors to stay with individuals for the duration of their career. This fear of being punished could put future management candidates off taking senior roles within financial services firms,” said Ben Blackett-Ord, chief executive of Bovill.
The survey did not however reveal animosity towards the current regime. On the contrary, 50% of those surveyed said that scrutiny was “correct”, while 27% thought it was only “slightly too high”.
Additionally, 36% thought that the UK regime, which the report described as the most comprehensive of its kind in Europe, contributes to the attractiveness of Britain as a place to do business. Bovill suggested that this might work in the country’s favour when firms choose their post-Brexit bases.
Nevertheless, the report called for investment in training and education for junior and middle managers, in order to dispel the myths hovering around the responsibility regime.
Blackett-Ord said: “There is a real risk that these regimes could lead to a brain drain, where top talent no longer aspires to take up senior positions in financial services companies.
“There are clear concerns about the personal risk associated with these roles … If unaddressed, in regions with higher levels of individual responsibility this could impede growth and innovation and stymie industry diversity.”
“It is reassuring to see that leaders accept and understand why scrutiny of their accountability is higher than ever before. But it is also evident that the potential leaders of tomorrow in the financial services industry are being deterred by what they view as the ‘lasting record’ nature of the new regulations, where judgement errors could bar them from working in the industry again.
“Only time will tell whether the Senior Managers and Certification Regime can deliver what it aims to achieve.”