Scrutiny of City appointments drops to lowest level since the credit crunch

According to the latest available data, 246 applicants for top jobs in financial institutions were interviewed by the City watchdog in 2012, down from 528 at the height of the financial crisis.

Pinsent Masons, which obtained the information through a Freedom of Information request, says that this is partly because applications for boardroom roles within regulated organisations have dropped to their lowest level in 5 years.

However, the firm also points out that the proportion of applicants called in for interview by the now defunct UK Financial Services Authority also fell to its lowest level for several years during 2012 - dropping to just 4%.

Pinsent Masons says that, under the current regime, candidates being considered for top roles in banks and insurance companies – such as Chairman, Chief Executive, Financial Director and Non Executives – are often called for interview if they are expected to take a role at a systemically important organisation, or if the regulator has specific concerns about their ability to do the job.

The rules for vetting senior personnel in financial institutions - 

known as the Significant Influence Functions regime - were highlighted as one of the key areas for reform in the final report of the Parliamentary Commission on Banking Standards.

All Change

Under proposals put forward by the Commission, led by Andrew Tyrie MP, the current process will be replaced by a more targeted "Senior Persons" regime.

Board-level Directors will be required to formally accept responsibility for key areas of risk, with a failure to meet obligations potentially leading to a custodial sentence in the most extreme cases.The new regime would also create an ongoing monitoring process rather than a 'one-off' assessment upon appointment.

Seismic Decisions

Monica Gogna, a London-based Partner specialising in financial services regulation at Pinsent Masons, says:

"After a period of turbulence, the boardrooms of UK financial institutions are showing signs of stabilising. What is really interesting about these figures, however, is that the proportion of those being interviewed has dropped for the first time since the credit crunch.

"While we are still some way away from the 'light touch' days of 2008 - when less than 1% of candidates were interviewed by the FSA - this data may suggest that we are actually already moving to a position where the regime is becoming more focussed and more targeted on those at the very top."

"We are also seeing fewer withdrawals from those candidates subject to interview during the vetting process, which suggests that the financial institutions themselves have a clearer view of what the authorities are looking for in applicants and recruiting accordingly."

"The level of boardroom scrutiny over the past few years has arguably been unsustainable and there now appears to be some recognition that it is also undesirable. Where the previous regime cast the net relatively wide, the proposals put forward by the Parliament Commission on Banking Standards would have a much narrower focus on the most senior people and create more of an ongoing relationship with the regulatory authorities."

"Given public anger over what is perceived as an inability to hold senior executives to account, it is right that the current regime be reviewed. However, these are seismic decisions, the impact of which will reverberate throughout the UK economy for years to come. A balance has to be struck between being vigilant while creating a system that does not discourages new entrants – whether it be talent or organisations – from coming into the UK market."