The UK’s Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have published new rules to encourage culture of whistleblowing at large financial firms in the country.
The new whistleblowing rules, which will come into force in September 2016, will require financial institutions to appoint a "whistleblower’s champion" and make arrangements to handle disclosures from all employees.
The rules also require banks, building societies and some insurers to tell employees that they have a legal right to blow the whistle and present a report on whistleblowing to the board every year.
These changes follow recommendations in 2013 by the Parliamentary Commission on Banking Standards (PCBS) that banks put in place mechanisms to allow their employees to raise concerns internally and that they appoint a senior person to take responsibility for the effectiveness of these arrangements.
The regulators have also proposed new rules on hiring in banks in a bid to prevent "bad apples" in banking industry from covering their tracks by changing jobs.
Under the new proposals, British banks and insurance firms would have to get references for new recruits going back six years, and the references should also include any breaches of the FCA’s conduct rules.
The watchdogs have proposed that from next March, both banks and insurers should use a mandatory form while getting references on senior recruits, such as non-executive directors.
The rules also require banks to disclose if candidates have been given a formal warning or had pay docked due to disciplinary action.
A firm also must not sign any arrangements that limit their ability to reveal significant information, the proposals added.
FCA chief executive Tracey McDermott said: "Whistleblowers play an important role in exposing poor practice in firms and they have in the past few years contributed intelligence crucial to action taken against firms and individuals. It is in the interests of the industry and regulators alike that wrongdoing is identified and addressed promptly.
"For individuals to have the confidence to come forward, it is vital that firms have in place adequate policies on dealing with whistleblowers and that a senior manager takes responsibility for overseeing these policies."