MAS to strengthen individual accountability of senior managers in financial institutions
Singapore, 26 April 2018... The Monetary Authority of Singapore (MAS) has proposed guidelines to strengthen individual accountability of senior managers and raise standards of conduct in financial institutions (FIs). The guidelines are a key part of MAS’ broader efforts to foster a culture of ethical behaviour and responsible risk-taking in the financial industry.
2 Mr Ong Chong Tee, Deputy Managing Director (Financial Supervision), MAS, said “Clear accountability and proper conduct are important elements of good governance and sound business practice. Persistent misconduct and a lack of individual accountability by persons in charge will erode public confidence in our FIs. We expect the boards and senior management of FIs to instil a strong culture of responsibility and ethical conduct.”
3 The proposed guidelines set out MAS’ supervisory expectations of boards and senior management with respect to individual conduct and behaviours. They are not designed to be prescriptive. It is ultimately the responsibility of each FI to hold its senior managers accountable for their actions and ensure proper conduct amongst their employees.
4 The guidelines reinforce FIs’ responsibilities in three key areas:
(a) Promote individual accountability of senior managers1
FIs should identify senior managers who are responsible for core management functions and clearly specify their individual accountabilities. FIs should ensure that senior managers are fit and proper for their roles and hold them responsible for the actions of their staff and the conduct of the business under their purview. The FI’s management structure and reporting relationships should be clear and transparent.
(b) Strengthen oversight of employees in material risk functions2
FIs should identify employees who have the authority to make decisions or conduct activities that can significantly impact the FI’s safety and soundness, or cause harm to a significant segment of the FI’s customers or other stakeholders. FIs should ensure that such employees are fit and proper and are subject to an appropriate incentive structure and effective risk governance.
(c) Embed standards of proper conduct among all employees
FIs should have in place a framework that promotes and sustains the desired conduct among employees. The conduct framework should articulate the standards of conduct expected of all employees and be effectively communicated and enforced throughout the organisation. Policies and processes should be implemented to ensure regular monitoring and reporting of conduct issues to the board and senior management. There should also be appropriate incentive systems and effective feedback channels, such as whistle-blowing mechanisms, in place.
5 The guidelines provide FIs with the operational flexibility to determine the most appropriate ways to achieve the desired outcomes of proper accountability and conduct. MAS will monitor FIs’ progress in implementing the guidelines through its regular supervisory engagements.
Various jurisdictions have introduced regulatory frameworks to strengthen individual accountability and conduct in the financial industry. These include the United Kingdom’s Senior Managers and Certification Regime and Conduct Rules, Hong Kong’s Managers-in-Charge Regime, and Australia’s Banking Executive Accountability Regime.
MAS has in place existing legislation and guidelines that address many elements of these jurisdictions’ accountability and conduct regimes. The proposed Guidelines on Individual Accountability and Conduct supplement the existing framework, focusing particularly on the measures that FIs are expected to put in place to strengthen the accountability of senior managers and promote ethical conduct at all levels of the organization.1 “Senior managers” refer to individuals who are employed in an executive capacity by, and are principally responsible for the day-to-day management of, the FI. These include, but are not limited to, senior managers performing the proposed list of core management functions as set out in Annex B of the consultation paper.
2 The consultation paper proposes to define “employees in material risk functions” as employees whose decisions or activities could materially impact a FI’s risk profile. Please refer to paragraph 5.15 of the consultation paper for details of the proposal.