08 June 2018 - Post by:Shuhui Kwok
Australia has its BEAR (Banking Executive Accountability Regime), Hong Kong its MCR and MAI (Manager-in-Charge Regime and Management Accountability Initiative) and the UK its SMCR (Senior Managers and Certification Regime). To this alphabet soup of accountability regimes will be added Singapore’s Guidelines on Individual Accountability and Conduct (Guidelines). Financial institutions doing business in two or more of these jurisdictions will need to be deft in deciphering how the different regimes will apply to their business and operations. Senior managers and employees in material risk functions will be especially impacted.
Singapore’s regime was proposed in a consultation paper by the Monetary Authority of Singapore issued on 26 April 2018 and which closed on 25 May 2018. The proposed Guidelines will apply to banks, insurers, capital markets intermediaries and infrastructures (FIs) and on a group-wide basis. The consultation paper indicates 4Q 2018 as the intended implementation date.
We wrote about the proposed outcomes-based regime in our update, “Financial Institutions in Singapore to Ensure a Culture of Responsibility and Accountability Applies from the Top Down”, which can be accessed here. This note will consider the steps that can be taken to meet the obligations as currently proposed.
- Map out the governance and reporting structure. As the proposed Guidelines will apply on a group-wide basis, a mapping exercise will need to be carried out in order to determine which businesses operate in which legal entities and how senior management fit into that structure. FIs with offices in the UK, Australia and Hong Kong will already have carried out, or will be in the process of carrying out, a similar exercise for their offices there. For them, this will both ease and complicate the exercise for Singapore as the proposed Guidelines are intended to apply on a group basis with no requirement that the relevant senior management be in Singapore. While this means that such FIs will be able to leverage on materials and thinking already developed for their offices in UK/Hong Kong/Australia – and indeed some of the senior management roles will be filled by the same people – it will also mean having to ensure that what has been established for offices outside Singapore will fit with the requirements of the proposed Guidelines.
- Review and document clearly the responsibilities of senior management. This will help to determine whether they have sufficient seniority and authority, and to ensure that their responsibilities are consistent with the operation of the business in practice. Particular care should be taken around the edges of responsibility where there is overlap and where there may be more than one senior manager for a specific core management function.
- Carry out a principles-based assessment of what the material risks to the business are and the persons responsible for those aspects of the business that would have an impact on these risks. The results of this assessment should be consistent with and feed back into the responsibilities map of senior management. Lines of reporting and responsibility should be made clear and should not be overly complex.
- Ensure that all employees understand the responsibility map, covering employees in a material risk function to senior managers. The exercise should include ensuring that appropriate authority and seniority are conferred on the relevant employees and managers. This should be supplemented by training, not just on roles and responsibilities, but also of standards of good conduct and statutory and regulatory obligations.
- Document the above exercise and ensure that the material is kept updated in line with changes in the business and the organisation. Based on our experience with the regime in the UK and in Hong Kong, the authorities will want to know, in the event that things go wrong, what could have been done to prevent and correct the incident. This requirement will likely apply equally to the Australia regime as well.
While implementation of some of the measures (such as training) are easier to establish and are already current in many FIs, others may be more challenging given the soft culture aspect of the requirements. FIs will also need to consider how existing applicable regulatory requirements in Singapore and in other jurisdictions will meet the requirements in the proposed Guidelines, and where additional steps will need to be taken in order to comply with the proposed Guidelines (in their final form).
This blog post was co-authored by Wee Teck Lim, a Professional Support Lawyer in our Singapore Office.
If you have any questions about this blog post please contact Investigations.Insight@AllenOvery.com