Technology Can Help Banks Comply with the Senior Managers Regime

  • Mark Holmes, CEO at Waymark Tech

  • 25.04.2017 07:45 am
  • technology

Last year, the Financial Conduct Authority introduced the Senior Managers Regime (SMR).

It promises to tackle the cultural problems uncovered during the financial crisis, and rebuild public trust in the sector. Initially confined to banks, SMR is set to be rolled out to all financial firms, including advisers, from 2018.

With hindsight, it’s clear to all that the banks failed during the financial crisis. Accountability was a moveable feast. Responsibility was, in some cases, completed shrugged off. The financial services culture had, to a large extent, gone rogue.  

SMR puts individual accountability front and centre. Senior managers now have a statutory duty of responsibility. If things go wrong, they can no longer say they didn’t know what was going on. Yes, the legal buck still stops with the firm, but individual managers will be held to account. They can delegate tasks but they can no longer delegate responsibility.

How do big organisations cope with the new regime? 

At first blush, SMR feels straightforward enough. It’s certainly sensible and clear – the CEO has the ultimate, statutory responsibility in most scenarios. But as with all things, how will SMR survive first contact with the real world? 

Banks are large organisations with thousands of moving parts. How do they ensure that they’re really on top of the SMR? How do they ensure that the right staff not only understand their roles under SMR but can spot issues quickly and feed them back up the chain? And how do smaller institutions make sure that they implement the rules effectively?

The answer is clear: banks will only be able to increase individual accountability if they improve the quality and depth of the data that they collect. And this is where technology can play a vital role.

Data provides the opportunity to be truly accountable

Responsibility and accountability cannot survive without good quality data. Managers at all levels need data to ensure they can properly carry out their responsibilities.

Now, with the advent of SMR, data has never been so important. To ensure compliance, banks – and soon smaller financial firms – need robust, modern data systems; tools that allow them to synthesise and analyse data effectively and fast.

The new SMR means that managers will now be responsible for the mistakes – and compliance failures – of their subordinates. To be sure they’re in control, they need much greater oversight. And to be truly accountable they need to monitor and understand every behaviour, action, and decision taken by their subordinates.

Managers can only do all this if they have good quality data.

Robust, rich data means that managers can get a clear picture of their subordinates’ actions – quickly and easily. They can zoom in where necessary, and take action where something looks wrong – or doesn’t match up where expected.

Data is the toolkit for managers to effectively monitor and manage their staff – and track progress – to ensure that they’re really in control of the areas for which they’re responsible. 

To get this right, managers will need to collect more information. But crucially, they’ll need to know that their bank is collecting the right – and most important – information too. Only then can managers be sure that they’re getting a totally holistic view of their departments and organisations.

Collecting all the information, not just some of it

It is easy for managers to kid themselves that they already have a good view of their organisation, when, in reality, they’re only seeing a very fragmented picture. Often they’re only collecting half the data that they need; leaving important data languishing unused in silos.

In preparation, many banks should undertake a review of their data structures to identify where data is being collecting, and what is being done with it – if anything at all. If data is lying dormant, that should be a warning sign.

This will raise new and difficult questions for banks around privacy. In order to get a full picture of their employees’ activities, banks may need to analyse and gather data from casual chats; monitor employees on Skype, WhatsApp etc; something that a number of banks have started doing, according to a new report from Financial News. These are difficult questions. But banks should not shy away from answering them. They need to.

Data is also needed to make sure that accountability is measured

But there is an even more important role for data to play in the SMR. As well as giving managers the toolkit they need to carry out their responsibilities effectively, data will also be needed to measure the performance of managers in carrying out their responsibilities themselves.

In the past it has been easy for banks to say that new regulations are being implemented. But regulators – and the Board of the bank – have struggled to measure whether their changes have made a meaningful difference. They couldn’t measure the real everyday impacts on the organisation. They relied on the assurances of their managers.

That is why data is critical for accountability under the SMR. Data is the measuring stick. It can be used to measure managers, their performance, and how well they have undertaken their new responsibilities. It is the probe that enables us to measure the temperature deep within an organisation – and not merely be deceived by surface appearances.

Giving hard, rich data to regulators will be the easiest way to win them around; the easiest way to convince them that meaningful change has been made. That the organisation has measurably improved.

Data is vital to the future of both big banks and small advisors

New technology that enables us to collect richer data, as well as synthesise it more effectively, must be a key plank of any bank’s SMR implementation process.

For big banks, where there are hundreds of thousands of individuals who have to be monitored, it is essential to have data systems that provide managers with a meaningful snapshot view of their organisations. For smaller firms, data is the easiest and most powerful way to demonstrate to regulators that are you’re taking regulatory change seriously.

And for big banks and smalls firms alike, data is fundamental to evaluating performance, and ensuring that responsibilities are actually being carried out effectively. Without it, we only have words. And words can be deceiving. Not only to regulators. But to ourselves too.

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