Global Individual Accountability Regimes

Following the Global Financial Crisis, regulatory bodies worldwide have implemented frameworks to enhance accountability among senior-level individuals in the banking sector, with the aim of restoring confidence in the financial system. Below is the map that shows recent global developments in conduct and culture guidelines from regulators globally.

 

 

In Malaysia, Bank Negara Malaysia (BNM) introduced the Responsibility Mapping policy document on 29 December 2023. This policy aims to reinforce individual accountability within the senior management team, aligning with the common goals shared by other global individual accountability regimes.

 

Each regime shares common goals of enhancing governance, ensuring transparency, and preventing future financial crises through clearly defined roles and increased personal accountability.

In Australia enacted the Financial Accountability Regime (FAR), requiring clear delineation of roles and heightened accountability for senior executives.


Financial Accountability Regime

The FAR introduces 4 core sets of obligations:


  1. Accountability obligations for accountable entities and accountable persons.
  2. Key personnel obligations.
  3. Deferred remuneration obligations; and
  4. Notification obligations.

In Hong Kong, the Securities and Futures Commission (SFC) introduced the Manager-in-Charge (MIC) regime, which emphasizes the allocation of specific responsibilities and oversight functions.


Manager-in-Charge

The regime clarifies the accountability of Senior Management of licensed firms and promotes greater awareness of their obligations.

Responsibility Mapping

The 4 high-level governance principles are:


  1. Board oversight for identifying responsible individuals.
  2. CEO to ensure seniority, competence, authority, and accountability of identified senior officers.
  3. Senior officers are to be accountable for conduct of responsibility areas.
  4. CEO to maintain register of each senior officer’s responsibilities.

In Singapore, the Monetary Authority of Singapore (MAS) implemented the Guidelines on Individual Accountability and Conduct to promote clear role definition and personal accountability among senior management.


Individual Accountability & Conduct

The guideline reinforces FIs' responsibilities in 3 key areas:


  1. Promote individual accountability of senior managers.
  2. Strengthen oversight of employees in material risk functions.
  3. Embed standards of proper conduct among all employees.

The Prudential Regulation Authority (PRA) established the Senior Managers and Certification Regime (SMCR), designed to ensure clear accountability for senior managers and robust certification processes.


Senior Managers & Certification Regime

The SMCR represents an overhaul of the former Approved Persons Regime, with new requirements for firms and individuals. The 3 pillars for the regime refer to:


  1. the Senior Managers Regime
  2. the Certification Regime 
  3. the Conduct Rules
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What is Responsibility Mapping?

The Bank Negara Malaysia (BNM) issued the Responsibility Mapping policy document to:

 

  • Ensure that all responsibilities within a financial institution, including those required by law, are clearly assigned to senior management.
  • Clarify and enhance the accountability of senior management, especially in cases of shared responsibilities, collective decisions, or matrix structures within groups.
  • Encourage careful consideration of whether senior management's responsibility allocation aligns with effective risk management, considering the institution's size and complexity.

 

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Our Point of View

Responsibility mapping is a critical component of the governance framework designed to embrace accountability and oversight within financial institutions. It involves clearly defining and assigning specific responsibilities to members of senior management, ensuring that every function and decision-making area is under the purview of competent individuals. This process is essential for aligning the organisation's governance framework with sound risk management practices, fostering a culture of transparency and ethical behavior.

The purpose of responsibility mapping is not to replace existing governance arrangements but to complement them. It supports the organization’s broader governance framework by ensuring that responsibilities are allocated appropriately, and that senior management is held accountable for their designated functions.

To effectively implement responsibility mapping, it is essential to understand the 4 principles that guide its application. These principles provide a framework for ensuring that responsibilities are clearly defined and aligned with the institution's governance and risk management objectives.

Principles of Responsibility Mapping

Key Requirements in the BNM Responsibility Mapping

Intended Outcome

Principle 1
Establish a process for identifying and allocating senior management responsibilities.

  • Board to provide tone-at-the-top and oversee the implementation of the Responsibility Mapping framework.

  • The CEO is responsible for ensuring that the responsibilities are comprehensively identified.

 

  • Comprehensive identification of responsibilities.

  • Cohesiveness between the responsibility mapping framework and other supplementary frameworks.

 

Principle 2

Identified responsibilities to be allocated to fit and proper senior officers.

  • CEO to ensure that all identified responsibilities are allocated to senior officers who have the professional competence, authority, and capabilities to fulfil the responsibilities.

 

  • Clear assignment to senior officers who are fit and proper for the role.

  • Authority of the Board and CEO to influence performance assessment and remuneration.

Principle 3

Senior management to be accountable for the management and conduct of the responsibilities.

  • Senior officers shall be held accountable for the management and conduct of the responsibilities, including for the staff under their purview.

  • Where responsibilities are shared, all individuals must be jointly and severally accountable for such responsibilities.

 

  • Senior officers to act in the best interest of the Financial Institution.

  • Competent and sufficient resources to discharge responsibilities on behalf of the senior officers.

 

 

Principle 4
Complete and up-to-date documentation to be maintained for each member of senior management.

 

  • Maintain complete and up-to-date documentation of responsibilities for each member of senior management.

 

  • Up-to-date and complete documentation of responsibilities of each Senior Officer.

  • Alignment of Financial Institution’s expectation and Senior officer’s understanding of responsibilities.

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Your Implementation Journey

The implementation of the Responsibility Mapping framework will ensure clear delineation of roles and responsibilities for senior officers within your organization, while fostering individual accountability over areas and staff under their oversight.

 

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Benefits of Responsibility Mapping

Strategic Alignment and Business Impact

 

Establishing clear accountability in complex governance structures can foster better decision-making, boost operational efficiency and financial performance, thus driving overall strategic objectives and improve stakeholder trust.

 

Meeting Prudential Standards

 

Establishing clear accountability which enable to meet the regulatory obligations to safeguard assets and reputation, as well as to avoid fines, penalties, and sanctions.

 

Foster a Culture of Ownership

 

Establishing clearly defined responsibilities and accountability pathways to ensure that employees at all levels take ownership of their roles and understand the impact of their decision, fostering a sense of ownership and commitment to achieving the financial institution’s objectives.

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Contact Us

Justin Ong

Partner, Regulatory & Financial Risk Leader Southeast Asia

Rebecca Faun

Senior Manager, Regulatory & Compliance Risk

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