Personal assurances or ‘attestations’ are increasingly used by the UK regulators to make senior managers in banks and financial services organisations personally accountable for failings in their organisation. They may relate to the delivery of specified standards in a certain area of the firm.
Concerns over the use of attestations have been raised by the FCA’s Practitioner Panel, which highlighted misgivings about the reliance on senior managers attesting that they will take action. Practitioners also feel that attestations can also skew prioritisation of risk at firms, and there are some concerns that the additional regulatory burden may make it difficult to recruit appropriate candidates to the most senior roles.
Many banks operate UK branches rather than a full UK subsidiary to handle customer transactions in the UK. The UK branch does not have to be separately capitalised, and the bank’s prudential regulation will remain mostly in its home country, even though retail deposits are usually covered by the Financial Services Compensation Scheme.
In September 2014 the Prudential Regulatory Authority announced new rules intended to increase its oversight of these branches, improve its ability to manage any damage to the UK economy should problems at the bank affect the operation of its UK branch, and manage its own liability in relation to retail deposits.
The new rules include a requirement for a senior individual in the UK management team to make an annual attestation that the branch complies with the PRA’s Senior Management Arrangements Systems and Controls Handbook.
Mark Spiers, Head of Wealth Management and Banks at Bovill, says:
“These banks will have to comply with the PRA’s request for an attestation – continued refusal would risk jeopardising their ability to operate properly in the UK.
“It goes without saying that individuals will be reluctant to give this kind of personal assurance without first assuring themselves that the branch meets the regulator’s expectations on management and controls.
“Should there be a problem further down the line, then the attestation would put the person signing firmly in the regulator’s sights when it came to disciplinary action, even if the problem was caused by something or someone not in their direct control.
“Any branch manager that hasn’t yet started to prepare for this needs to act fast.”
