The banking sector has welcomed the Treasury's move to suspend the 'reverse burden of proof' rule in the senior management regime. The rule, lifted in cooperation with the Financial Conduct Authority, meant that senior management of failing banks were guilty until proven innocent.
It was previously up to senior managers of banks involved with fraud and manipulation to prove their innocence, otherwise they would be assumed to be guilty. Now, the task of proving innocence is given to regulators
"The FCA is right to drop the ridiculous 'reverse burden of proof' requirements from the Senior Managers Regime," Oliver Parry, corporate governance adviser at the Institute of Directors commented.
"Scandals across the banking industry such as Libor, foreign exchange rate-rigging and PPI misselling have given bankers a toxic name and we support the regulators as they seek to address what went wrong before, during and after the financial crash.
"This rule, however, which was both unworkable and excessive, was a step too far. It is encouraging to see policymakers heed the advice of the IoD, and others, who raised concerns when the rules were first proposed."
The rule was lifted at the same time the Treasury announced that the overall Senior Management Regime will be extended to the entire financial services sector, including the investment and mortgage business. The regime gives the Bank more power to hold senior managers to account and is aimed at preventing further failings in compliance.
The FCA said in a statement that the extension across the sector is important to ensure that there is a sense of personal responsibility across the business.
"While the presumption of responsibility could have been helpful, it was never a panacea," acting chief executive Tracey McDermott commented. "There has been significant industry focus on this one, small element of the reforms, which risked distracting senior management within firms from implementing both the letter and spirit of the regime."