Managing Individual 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 would be an effective process to identify the responsibilities for each member of the senior management? Additionally, for organisation structure with Deputy CEOs overseeing multiple departments and department heads, what would be the recommended approach in mapping responsibilities?

Financial institutions may begin by referring to the 'List of Responsibilities' in Appendix 1 of BNM Responsibility Mapping Policy Document to determine who is ultimately accountable to the Board and CEO for key decisions. When distributing responsibilities, the following key factors should be considered:

Professional Competence, Authority & Capability of Senior Officers

• Financial institutions must ensure senior officers meet the Fit and Proper criteria as outlined in BNM Fit & Proper Criteria Policy Document, which covers (1) probity, integrity, and reputation, (2) competency and capability, and (3) financial integrity.
• In terms of authority (Paragraph 7.6(b) of BNM Responsibility Mapping Policy Document), it is important to assess where decision-making authority actually resides with the individual, beyond formal titles. Financial institutions should ensure the senior officer has the necessary authority to effectively discharge their responsibilities.
• Financial institutions should also evaluate if the current remuneration, conduct, and consequence management frameworks effectively incentivise good behavior and penalise misconduct, fostering proactive ownership.

Proportionality – Size of the Senior Management Team

• As outlined in Paragraph 7.3(a) of the BNM Responsibility Mapping Policy Document, financial institutions should consider whether the size of the senior management team is appropriate given the financial institution's size, scale, risk profile, and complexity.
• The number of senior officers and the distribution of responsibilities should be proportional to these factors and should be fair and reasonable.

Governance Structures and Arrangements within the FI and Its Affiliates

Financial institutions must evaluate governance structures, especially in cases of shared responsibilities, collective decision-making, matrix reporting, or centralised functions, to determine who holds ultimate accountability for decisions made regarding each function.

Responsibility Mapping for organisational structures with Deputy CEOs (DCEOs) overseeing multiple departments

• A clear approach is to map responsibilities based on where authority and accountability naturally reside within the structure. This includes ensuring that department heads report upwards in a way that clearly defines decision-making authority and aligns with the financial institution's governance framework.
• It is crucial to delineate between operational responsibilities of department heads and strategic oversight by the DCEOs to avoid ambiguity.
• According to Principle 2, paragraph 7.4 of the BNM Responsibility Mapping Policy Document, senior officers are primarily responsible for reporting matters pertaining to their function to the CEO or the board.
• Furthermore, Principle 2, paragraph 7.5 states that the CEO must ensure that the allocation of responsibility to senior officers aligns with the financial institution’s organisation structure and governance framework.

Can a senior manager, whose role may not always be recognised as that of a senior officer and who may not report directly to the CEO, still be held accountable?

The BNM Responsibility Mapping Policy Document applies to senior officers who are defined as members of senior management, other than the CEO, employed by a financial institution or an affiliate, with the authority and responsibility for planning, directing, or controlling the financial institution's activities. These individuals report matters related to their function to the CEO or the Board, depending on the requirements of their role.

Principle 3, paragraph 7.11, states that senior officers will be held accountable for the management and conduct of their responsibilities, including the staff under their purview. For example, the Chief Compliance Officer oversees the Head of AML. In this scenario, the Chief Compliance Officer falls within the scope of the BNM Responsibility Mapping Policy Document and will be held accountable for the effective performance of the responsibilities of the Head of AML, as the Head of AML operates under their purview.

What are the best practices for ensuring compliance with Principle 4 on ensuring complete and up-to-date documentation?

Principle 4 of BNM Responsibility Mapping Policy Document states that financial institutions must maintain complete and up-to-date documentation of responsibilities for each member of senior management.

Financial institutions can either create new documentation or leverage existing documents, ensuring they meet the minimum information requirements outlined in Principle 4, paragraph 7.16 below:

• Responsibilities of the role at both the financial institution and within the group (where applicable);
• Interim or project-based responsibilities that involve substantial contributions or deliverables from the senior management member;
• An explanation of whether responsibilities are identical or differ for individuals sharing a role;
• Clarification of arrangements for shared responsibilities between involved individuals; and
• Responsibilities in collective decision-making forums.

As outlined within Principle 4, paragraph 7.17, to ensure that documentation is up-to-date, financial institutions should at minimum, obtain senior management acknowledgment at the time of appointment and after any significant changes in responsibilities. Additionally, financial institutions should also establish a timeline for routine updates to reflect changes in organisational structure, revision, or addition to current responsibilities, or shifts in governance practices.

Furthermore, financial institutions should ensure that the documentation encompasses all relevant aspects of the individual’s responsibilities, including specific duties within the financial institution and its group (if applicable), interim or project-based roles, shared responsibilities, and participation in collective decision-making forums.

Finally, financial institutions must ensure that the documentation is sufficiently granular to provide specificity regarding the actions and decisions for which each member of senior management is accountable. This includes detailing key responsibilities, expected outcomes, and the distinctions between shared roles.

Who is responsible for driving the implementation of the Responsibility Mapping framework?

The responsibility for driving the implementation of the Responsibility Mapping framework should not rest solely with any one department, such as Human Resources or Compliance. Instead, it requires a collaborative effort across the entire financial institution. While the CEO is ultimately responsible for ensuring the successful implementation of the framework, financial institutions are encouraged to establish a dedicated support team to assist with this process.

The dedicated team leading the initiative must possess the necessary influence, authority, and vision to drive meaningful change, ensuring that the framework is seamlessly integrated into the financial institution's governance and accountability structures. The team should be led by a project champion who is a senior-level individual with a strong rapport with senior management and the board, as well as a deep understanding of the organisation’s dynamics, governance arrangements, and the interdependencies of responsibilities and reporting lines.

The project champion should serve as a "North Star" throughout the implementation, anchoring the financial institution’s vision, catalysing collaboration, and guiding the financial institution in navigating challenges. This individual will lead decision-making and problem-solving efforts, surfacing challenges, facilitating discussions, and ensuring active involvement from key stakeholders to foster alignment with the framework’s goals, resulting in effective implementation.

Additionally, the team should maintain clear communication with senior leadership and the board, and be equipped with the manpower, budget, and infrastructure required for successful implementation.

How to ensure senior management buy-in and operationalise the framework?

Senior management buy-in is essential for the successful implementation of the Responsibility Mapping framework. It begins with the Board setting the right tone from the top, driving a cultural shift toward individual accountability. Senior officers must actively support the initiative, model accountability in their own roles, and engage their teams to create a ripple effect across the financial institution.

Integrating individual accountability into the existing governance framework requires a deliberate and sustained effort—it won't happen on its own. This cultural transformation demands intentional action and commitment to embedding these principles into the financial institution’s core practices.

Clear communication of the framework’s benefits, regular training, and ensuring that accountability becomes part of everyday decision-making are critical steps in operationalising the framework.

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