FSA split sparks concern over job approvals
London Feb 25 (IFR) - London-based investment banks are growing increasingly concerned that a split of the Financial Services Authority in April will delay approvals for senior-level employees, with two rubber stamps becoming necessary instead of one.
Some have already begun to press their case to the FSA - which will be split into the Prudential Regulatory Authority and Financial Conduct Authority in just a few weeks' time - amid concerns that improvements in the time taken to get approval over recent years may now be reversed.
All banks in the UK currently have to obtain approval from the FSA when appointing someone for what are termed controlled functions. After the split, they will apply through one of the institutions depending on the position, but will then need approval from the other body.
FSA figures show that between April and December of last year, some 91% of the 15,487 applications received were processed within five to ten days, with 1,422 cases taking up to three months.
The numbers represent a gradual improvement over the last two years (see chart), which has seen a steady decline in the number of applications taking longer than 10 days - something aided by a drop in the number of applications from 47,305 a few years back.
Ronit Wolfson, a spokesperson at the FSA, told IFR that the process would effectively be the same after the split, and that banks should not expect more complications. Nonetheless, banks and their lawyers who sometimes represent individuals in the approval process are nervous.
"It's too early to say, because the split has not happened yet," said a lawyer in London who represents several financial institutions. "But there is an expectation that things might get interesting in the new regime where they might pull in different directions.
"It has become more complicated because they will have an internal process for approving from both sides," he said. "It already can take up to three months, which in theory is their statutory limit."
Bankers describe a process that has nearly gone full circle. Many said it used to be a "rubber-stamp joke" which became much tougher after the collapse of Northern Rock. That remained the case until about two years ago, when the FSA refocused its attention on prosecutions, fines and the Libor scandal.
FSA chief executive Hector Sants said last year only in extreme cases would it interview non-executive directors for approval. According to an earlier report in the Financial Times, standards do seem to have become relaxed. In 2010, 7.3% of so-called significant influence function applications were sent back for review. That has since declined to 4.6% in 2011 and 2.3% last year.
In October, the FSA released a 183-page document detailing how the system would work under the new regime. The report stated that it wanted a more fluid procedure and went into extensive detail on which functions each regulator would have. However, it acknowledged that there were certain circumstances that could be more complicated, such as when a SIF position had responsibilities that were regulated by both bodies.
"The truth is we don't know how it will work until it happens," said the country head of a European bank based in London. "I think that they have recognised that their resources are put to better use on other matters, but we worry that this might become a new distraction."