Source · Select Committees · Treasury Committee
Recommendation 1
1
Not Addressed
Paragraph: 31
It is not immediately clear that Mr Bailey’s concerns about the distinction between “responsibility” and...
Conclusion
It is not immediately clear that Mr Bailey’s concerns about the distinction between “responsibility” and “culpability” in Dame Elizabeth’s draft report would have “compelled” him to make his “free-standing” objection. However we accept that it is likely that his strong concerns over the “responsibility” vs “culpability” point may have led him to make his “free-standing” objection to the inclusion of named responsible individuals, and that in the absence of his concerns about the distinction between “responsibility” and “culpability” he might not have put forward his “free- standing” objection. We cannot of course be certain about this and if we were satisfied that there was strong and clear evidence that Mr Bailey had misled the Committee on this point, it would be a serious matter. But the evidence does not support that particular conclusion, and we do not believe that Mr Bailey misled the Committee. We note that the revisions made by Dame Elizabeth to the draft report, clarifying that an identification of responsibility was not an attribution of culpability, met the essence of Mr Bailey’s request, and we believe that it is in the wider interest to regard this issue as closed.
Government response summary AI-generated
The government response describes the FCA's holistic recruitment approach for senior leadership roles, including internal succession planning and global searches, but does not address the committee's conclusion regarding Mr. Bailey's objections or the 'responsibility' versus 'culpability' distinction.
Summary of the government's response below — read the verbatim text to verify.
Paragraph Reference:
31
Government Response
Not Addressed
HM Government · verbatim extract
Not Addressed
The Senior Managers Regime, which focuses on the most senior individuals who perform key roles, aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct. By driving greater clarity about who is accountable for what, the regime minimises the potential for overlaps and underlaps in accountability. Furthermore, the regime has been designed so that individual accountability does not cut across or undermine the collective decision-making of an organisation’s governing body. Although the FCA is not within the scope of the Senior Managers Regime, we have adopted and applied the principles of the Regime to our senior managers, as we expect those individuals to meet standards of professional conduct as exacting as those required in regulated firms, and for those individuals to be held accountable for functions they personally direct. Since 2016 we have set out what our Senior Managers are responsible and accountable for in published Statements of Responsibility,1 and our Management Responsibilities Map sets out our management and governance arrangements, providing a collective view of the allocation of responsibilities across the FCA. As our public Management Responsibilities Map makes clear, the CEO is accountable for the organisation overall, and the Executive Directors are accountable for the performance of their divisions. Under the Senior Managers Regime, establishing who is accountable is a first step in considering their conduct. The next step is to consider whether there is evidence of personal culpability on the part of that individual. Personal culpability arises if the individual’s behaviour was deliberate or below the standard which would be reasonable in all the circumstances at the time of the conduct concerned. It is important to note that there is no assumption of guilt or reverse burden of proof in this process. So in the context of Dame Elizabeth’s Report, the next step for the Board was to assess the reasonableness of the actions that named individuals took in light of all the circumstances, taking into account the steps they took to make improvements, as well as the overall scope of their responsibilities, the challenges they faced in those other responsibilities and the priorities set by the Board. In its consideration of these factors, the Board concluded that the named individuals did identify problems in the approach of supervising small firms; that they put in place an extensive programme to address these problems; that their responsibilities were very wide in scope; and that their priorities within those wider responsibilities were endorsed by the Board. There were no findings of personal culpability or misconduct in this case.
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