Shearman & Sterling LLP | Financial Regulatory Developments Focus | UK Banking Standards Board Publishes Further Guidance on the Certification Regime
Financial Regulatory Developments Focus
  • UK Banking Standards Board Publishes Further Guidance on the Certification Regime
    The U.K. Banking Standards Board has published further Supporting Guidance to its Statement of Good Practice on the Certification Regime: Fitness and Propriety Assessment Principles (known as Statement of Good Practice 1). The new Supporting Guidance, "Establishing Pass/Fail Criteria and Evidencing the F&P Assessment" (known as Supporting Guidance 2), aims to assist firms and other persons assessing fitness and propriety in making certification decisions, particularly in borderline cases. The Certification Regime is part of the regulatory reforms introduced in the U.K. to strengthen individual accountability (namely, the Senior Managers Regime, the Certification Regime and the Conduct Rules). It requires firms to certify that all individuals in roles which pose a risk of significant harm are "fit and proper." The U.K. regulators are proposing to extend the Certification Regime to all other regulated firms. The BSB was launched in April 2015 as an industry initiative to help raise standards of behavior and competence in the banking sector.

    Supporting Guidance 2 should be read with the Statement of Good Practice 1 and the Supporting Guidance to Statement of Good Practice 1 on the Certification Regime: Fitness and Propriety Definitions, Sources of Information and Assessment Record Template (known as Supporting Guidance 1), each of which were published in February 2017. The Statement of Good Practice 1 is a high-level set of principles relevant to the assessment of fitness and propriety which aim to assist firms in effectively implementing the requirements of the Certification Regime, to raise industry standards and ensure that assessments are fair, consistent and transparent. Supporting Guidance 1 includes definitions of each element of fitness and propriety (honesty and integrity, reputation, competence and capability and financial soundness), an overview of different types of assessments and an assessment record template.

    Supporting Guidance 2 provides guidance on the practical implementation of Principle 4 (establishing pass/fail criteria) and Principle 5 (evidencing the F&P assessment) of the BSB's Statement of Good Practice. It includes illustrative examples of issues that firms may face when assessing fitness and propriety. Guidance is provided on how those issues could be tackled. The Guidance does not impose any legal or regulatory obligations on BSB members, nor does it replace any of their existing regulatory requirements.

    A consultation report, published alongside the final Guidance, sets out a summary and analysis of the responses to the consultation on the Guidance that was carried out in Q3 2017.

    View Supporting Guidance 2.

    View the consultation report.

    View the Statement of Good Practice.

    View Supporting Guidance 1.