Should senior managers be more involved in compliance?

Should senior managers be more involved in...Senior managers should make more of an effort to get involved in banking compliance issues, according to a leading industry figure.


Mark Steward, the new head of enforcement at Britain’s Financial Conduct Authority (FCA), made this suggestion during his first speech in the role at the MetricStream GRC Summit in London last month, Reuters reports.


He believes that senior managers need to take a greater level of responsibility for compliance issues in a bid to improve regulation across the whole of the banking industry.


But exactly what role can senior managers play in compliance?

Why do senior managers need to get involved?

In order to ensure the utmost success and to keep a bank’s risk level to the absolute minimum, its compliance team needs clear direction and leadership.


Traditionally, this might have been a matter for a procurement or compliance officer, but this raises the question of whether or not it is fair for these members of staff to be blamed if a compliance issue arises. After all, they’re under the instruction of someone, so why aren’t their seniors getting involved in regulating the organisation as well?


Scandals such as the misselling of payment protection insurance have dogged the banking industry in recent years, but were the right people held responsible and did the most suitable members of staff get involved when it came to resolving issues?


In his speech, Mr Steward revealed that he only knew of two occasions throughout his almost 30-year career when financial chief executives had attended meetings with lower-level members of staff to take the blame and try to salvage the situation after their bank had fallen foul of industry regulations.


Yet in the rare event that this was the case, he said this showed other employees, as well as the public, that they cared about the mistake and wanted to fix it.


What’s more, Mr Steward believes this shows senior managers place more importance on their customers than on their profits – something the banking industry is striving hard to prove at present by introducing new rules and large fines reaching into the millions for all those that fail to comply with official regulations.


Mr Steward explained: “Many know their problems, but can’t fix them. This is a sign that culture isn’t working…problems that don’t get resolved get bigger or become toxic.


“I think that the need for early detection and effective uprooting of misconduct – or the effective solving of a problem – is the most important thing any organisation can do.”


He added that for chief executives to become successfully involved in compliance matters, industry regulators and banks need to be working on the same page, which he committed to ensuring during his summit speech.


Mr Steward explained that he had seen similar practices in action during his time working in Hong Kong. He noted that several regulators overseeing some of the major financial centres in New York, London and Singapore had long harvested a culture of collaboration and cooperation, with the benefits being clear to see.


These include the fact that problems are more likely to be escalated to the right people if senior managers are involved, as well as that chief executives are often better able to predict how long an issue will take to fix, alongside the best strategy to implement change.

What would this mean for the future of the compliance industry?

If the industry takes note of Mr Steward’s speech, there could be a subsequent increase in demand for senior-level employees with compliance knowledge.


As soon as the c-level executives of one bank begin to involve themselves in compliance, others are bound to follow in their footsteps to ensure they stay at the competitive forefront of the sector.


With Mr Steward hoping that senior-level involvement in compliance will become the norm in the future, this suggests that recruitment for such roles is set to increase over the next few years.


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