06 October 2015

Bank of England: Strengthening accountability in banking and insurance: regulatory references

The main proposals for RAPs and insurers (ie Solvency II insurers and large NDFs) are:

• Requiring these firms to request regulatory references from former employers of candidates applying for SMF, and certified function RAPs, along with SIMFs at insurers, going back six years.
• The PRA proposes a similar requirement for RAPs and insurers in respect of candidates applying for a KFH or notified NEDs role.
• Modifying certain prescribed responsibilities for Senior Managers in RAPs and insurers to include compliance with the regulatory references rules.
• Mandating the inclusion of determined breaches by approved persons, key function holders and notified NEDs, of the conduct requirements in FCA Conduct Rules (COCON), PRA Conduct Rules or Conduct Standards, and Statements of Principle and Code of Practice for Approved Persons (APER) going back six years.
• Requiring disclosure by RAPs and insurers in a standard format, including the need to confirm where there is no relevant information to disclose.
• Requiring RAPs and insurers to update previous references given more than six years ago, where they become aware of matters that would have changed their original assessment if they were giving that assessment today.

The proposals applicable to all authorised firms can be summarised as:

• Clarifying that a firm must not enter into any arrangements or agreements that limit their ability to disclose relevant information.
• Enhancing systems and controls requirements relating to the retention of records and the policies and procedures for both requesting and providing regulatory references.

The existing requirement for firms to disclose all relevant information in references remains. Firms should exercise judgement on what should be disclosed, including outside of the mandated information and time periods. In doing so, the reference should meet the firm’s legal obligations to ensure that it is clear, accurate and fair.

The regulators will consider in due course, alongside any wider reform of the Approved Persons Regime, whether the specific proposals for RAPs and insurers should be extended to all authorised firms. This will include consideration of specific, mandatory disclosures and the use of a template. Subsequent reforms will be consulted upon as usual.

The PRA is also consulting on proposals for all KFHs at Solvency II insurers and large NDFs to have an up-to-date and agreed document setting out their scope of responsibilities, and for these insurers to retain these documents along with the associated governance map for ten years for Solvency II insurers, and six years for NDFs.

The consultation period for this CP is two months. This will allow final rules to be in place for the start of the accountability regime on 7 March 2016.

Full information

Consultation paper

© Bank of England