MAS consultation on individual accountability and conduct

Bovill

The MAS has proposed guidelines to strengthen individual accountability of senior managers and raise standards of conduct in financial institutions (FIs). Open for feedback until 25 May, if implemented, the guidelines will require FIs to promote individual accountability of senior managers, strengthen the oversight of employees in Material Risk Functions (MRF) and embed standards of proper conduct among all employees.

Poor culture was identified to be one of the root causes of misconduct and egregious risk-taking in the financial industry. Rightly so, the MAS have identified that culture stems from the top. The Board and Senior Management of FIs have important roles in establishing organisational culture and ensuring that appropriate policies and processes are in place in line with the FI’s desired culture.

The MAS is approaching this from an outcomes perspective. They have set out five outcomes that FIs are expected to work towards, and guidelines to suggest how FIs can achieve these outcomes. The outcomes-based approach is intended to facilitate implementation, taking into account the different sizes and structures of FIs. Hence, FI’s have the flexibility to explore different means of achieving the outcomes, proportionate to the nature, size and complexity of their operations.

Who will the guidelines apply to?

The guidelines when implemented will apply to all financial institutions in Singapore. In addition, for locally-incorporated banks and insurers that are headquartered in Singapore, the guidelines must apply to local and overseas subsidiaries and branches. For locally-incorporated subsidiaries of foreign banks and insurers, the guidelines must apply to all downstream subsidiaries and branches in Singapore and overseas.

The five proposed accountability and conduct outcomes

Outcome 1: Senior managers in Core Management Functions are clearly identified.

Outcome 2: Senior managers are fit and proper, and held responsible for actions of their staff and conduct of the business under their purview.

Outcome 3: The FI’s governance framework is supportive of and conducive to senior managers’ performance of their roles and responsibilities. Overall management structure and reporting relationships are clear and transparent.

Outcome 4: Employees in MRFs are fit and proper and subject to effective risk governance, as well as appropriate standards of conduct and incentive structure.

Outcome 5: The FI has a framework that promotes and sustains the desired conduct among all employees.

Expected timeframes for implementation

The guidelines are targeted to be issued in Q4 of 2018. However, the MAS has emphasised that they will adopt a consultative approach to assessing FIs’ compliance with the guidelines in the initial phase of implementation, and continue to engage with FIs on the adequacy and effectiveness of their practices.

How Bovill can help

Gap Analysis – FIs may be unfamiliar with such a regime, or alternatively those with operations in jurisdictions such as the UK, Hong Kong, and Australia could already have implemented policies that can go some way to meet the MAS’ outcomes. We can help identify and then fill the gaps so that you meet the MAS requirements.

Implementation – We can help you to implement the guidelines in a manner that is risk proportionate to your firm.

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