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From 1 July 2017, the finance and banking industry operating in the UK will be represented by a new trade association, UK Finance. It will represent around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation will take on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.x
Written by Julie Pardy, Partner, FSTP
When CP 18/15 dropped onto my desk at the end of last month, I noted with interest that the Prudential Regulation Authority had decided to “consult” on board responsibilities.
I have highlighted consult, as although this paper is open for responses until 14 September 2015, this consultation reads more like a “good practice” guide than in fact a consultation.
The driver for this publication, it would seem, is that as the regulator reflects on what the key factors have been in many of the major financial sector failures of recent years, it clearly sees that good governance must exist if a board is to be effective.
The consultation paper itself focuses on areas of good board governance that are of particular interest to the regulator. The PRA also clearly states within the document:
“We have a major interest in promoting good governance across the financial sector and supporting the work of boards in order to deliver this.”
It is interesting to note that the PRA has highlighted 12 key areas where it is providing guidance to the industry, namely:
FSTP works regularly with the boards of financial organisations across banking, insurance, consumer credit and investment, and we were interested to note the regulator’s growing interest in board composition and succession planning. Whilst many of the items highlighted in its 12 key areas won’t be news to many, we have noticed a rising interest from both the PRA and Financial Conduct Authority in these two areas.
We have seen in the last few years increasing expectations from both regulators in terms of the non-executives’ contributions to the board, and this is highlighted in the PRA comments about board composition in this particular publication.
With regards to succession planning, whilst many very effective boards have very robust training and briefing programmes in place for the exec and non-exec, we often find that the planning and execution of “board ready” leadership style programmes for those “executives in waiting” is not quite so structured and thought through.
So, where does this consultation paper leave PRA regulated firms? We think it leaves firms with an opportunity to use the PRA’s concerns to help ensure that when the regulator does visit and challenge you and your business on your corporate governance arrangements, that you are aligned in your thinking and your practical application.
In our opinion this is clearly a “flag” on what is coming next in terms of the PRA’s oversight of boards and their competence and capability. It’s one worth taking time out to read and review if you’ve not done so already, as it’s quite clear where the PRA is taking its thinking in this particular area.