Number of financial services senior executives now personally accountable for misconduct at their firms two-thirds lower than expected, but impact felt in hiring for top roles

June 20, 2016

  • Only 3,159 individuals now come under senior managers regime - around 11,000 were expected

  • Responsibilities concentrated among key individuals – driving up remuneration in some roles

  • Making London a less attractive location for internationally mobile candidates?

The number of senior UK financial services executives who can now be held personally responsible for misconduct at their firms, following the introduction of new rules in the UK banking industry,  is around two-thirds lower than the original FCA estimate, says global executive search firm DHR International.

DHR International says that the impact of the Senior Management Regime ('SMR') is already effecting hiring for top roles.

According to data from DHR International, a total of 3,159 individuals were allocated SMR ‘prescribed responsibilities’ when the SMR regulations came into force on 7 March 2016. However, FCA estimates last year forecast that the new SMR legislation would affect the roles of around 11,000 senior managers*.

The new SMR rules are designed to increase accountability across the financial services industry. Senior managers can face personal fines, suspension and bans if they fail to take reasonable steps to prevent misconduct in areas for which they are assigned personal prescribed responsibilities.

DHR International believes that one reason why the number of individuals is lower than expected is that many have multiple prescribed responsibilities under the regime. Although 11,694 prescribed responsibilities have been allocated, these have been distributed with an average of 3.7 per individual senior manager, presenting some senior executives with more roles than they may have originally anticipated.


Number of individuals with selected personal responsibilities under Senior Managers Regime
• 794 individuals responsible for countering the risk of financial crime
• 309 responsible for the induction, training and professional development of staff and the governing body
• 314 responsible for the firm’s culture
• 335 responsible for whistleblowing policy and systems
• 165 responsible for managing capital, funding and liquidity
• 159 responsible for overseeing the firm’s recovery plan and resolution pack
• 166 responsible for managing internal stress tests
• 32 responsible for proprietary trading
Source: DHR International/FCA


DHR explains that having a broad range of responsibilities concentrated on relatively few key individuals is already impacting recruiting for some top roles.  For example:

  • Candidates are reluctant to take on new roles where they could be personally responsible for the actions of hundreds or even thousands of staff members, and so are prepared to enter into protracted negotiations to ensure their personal regulatory responsibilities are as limited as possible
  •  Where this is unavoidable, they are negotiating hard for compensation for the risk in the form of a larger remuneration package or more support including enhanced corporate indemnities and insurance arrangements.
  • The SMR may also prompt top candidates in the financial services sector to look overseas for their next roles, with senior positions in competing financial centres like New York, Hong Kong and Singapore not subject to such heavy burdens of personal liability

 The SMR prescribed personal responsibilities include:

  • Responsibility for the firm’s performance of its obligations under the SMR
  • Responsibility for managing the firm’s internal stress-tests
  • Management of the allocation and maintenance of capital, funding and liquidity.

Stéphane Rambosson, Managing Partner and Head of DHR International’s Financial Services practice, says, “Far fewer people than anticipated are currently falling within the scope of the Senior Managers Regime - but its effects are already being felt in hiring for senior City posts.”

“Many of those who now come under the SMR’s scope have taken on an extensive and varied range of prescribed responsibilities. This could make it very difficult for them to have adequate oversight to protect their firms and themselves, while meeting demanding revenue targets.”

“The most in-demand City executives are looking for bigger remuneration and better personal protection packages when negotiating for new roles that are caught under the Regime, to offset the risks of putting their own necks on the line.”

“Even though City pay overall remains under pressure, the amount of sugar needed to sweeten the deal in these cases is not inconsequential.”

Michaela Rosbrook, Partner and member of DHR International’s Financial Services Practice, continues “It remains to be seen whether pushing up pay and personal protection packages for these key hires will be enough to make up for all the personal accountability issues of working in London for internationally-mobile senior executives.”

“There’s real concern that the City could lose out to other leading global financial centres that don’t place such heavy liability burdens and the related costs on top talent. Cities like New York, Paris and Singapore could reap the benefits.”

“The issue over the regulatory challenge to London will move back to the top of the agenda once Brexit issues are resolved.”

She adds, “Contract negotiations are also becoming more complex and lengthy, as firms and candidates thrash out exactly what an individual is taking on when they take up a new role and whether it falls under the Senior Managers Regime.”

“This risks putting the nascent employer/candidate relationship under a certain pressure at the outset.”

*At banks, building societies and credit unions.