Banks are being forced to develop their own informal system of background checks on job applicants since the UK authorities have stopped maintaining a register of people approved to do a wide range of jobs in finance.
Instead of a simple check on the Financial Services Register, banks now need to engage in potentially awkward communications with competitors who used to employ the applicant.
From the introduction of the Senior Managers Regime by the UK regulators on March 7, the only register entries being updated are those of personnel named under the regime, which makes senior executives personally responsible for misconduct by their subordinates.
Instead of checking an entry in the register, without which a person was unable to work in many financial jobs, the institutions where someone has been employed will be required to provide a more detailed “regulatory reference” – but the Financial Conduct Authority and Prudential Regulation Authority are not due to publish standards for the new references until late 2016.
Investment banks have had meetings and discussions on informal ways to fill the gap, according to compliance and regulatory specialists in the City.
Tim Howarth, a partner at consultancy KPMG, said banks were in the process of establishing informal agreements to share more information on job applicants.
He said: “There are some informal agreements between some of the bigger banks on how they will get the regulatory references. There have been a number of industry [gatherings] where banks have sat around together and agreed the framework. There’s nothing written down saying we’ll do x, y and z but they are accepting the spirit of the requirements.”
Jan Putnis, head of financial regulation at law firm Slaughter and May, said he had seen “heightened concern” from employers about the quality of checks that they are able to run on new employees and the quality of information they can expect to receive from former employers.
A compliance officer at a UK bank said: “The industry has had to find a solution to a situation that is obviously less than ideal whereby your FCA register disappears and there’s no specific guidance around regulatory references, so banks will be talking among themselves because we all want the same thing which is not to have bad apples rolling through the industry.”
An FCA spokesman said: “The FCA remains committed to implementing a more comprehensive framework for regulatory references later in the year. The final rules will be accompanied by a transition period to allow firms time to implement any changes.”