News Risk Management02 May 2018

Singapore:MAS issues guidelines on individual accountability of senior managers in financial institutions

02 May 2018

The Monetary Authority of Singapore (MAS) has launched a public consultation on proposed guidelines to strengthen individual accountability of senior managers and raise standards of conduct in financial institutions (FIs). The guidelines are a key part of MAS' broader efforts to foster a culture of ethical behaviour and responsible risk-taking in the financial industry.

“Clear accountability and proper conduct are important elements of good governance and sound business practice. Persistent misconduct and a lack of individual accountability by persons in charge will erode public confidence in our FIs. We expect the boards and senior management of FIs to instil a strong culture of responsibility and ethical conduct,” said MAS deputy managing director (financial supervision) Ong Chong Tee in a statement issued by the regulator last week.

The proposed guidelines set out MAS’ supervisory expectations of boards and senior management with respect to individual conduct and behaviours. They are not designed to be prescriptive, said the regulator. It is ultimately the responsibility of each FI to hold its senior managers accountable for their actions and ensure proper conduct among their employees.

The guidelines reinforce FIs’ responsibilities in three key areas:

(a) Promote individual accountability of senior managers

FIs should identify senior managers (defined by MAS as individuals who are employed in an executive capacity by, and are principally responsible for the day-to-day management of, the FI) who are responsible for core management functions and clearly specify their individual accountabilities. FIs should ensure that senior managers are fit and proper for their roles and hold them responsible for the actions of their staff and the conduct of the business under their purview. The FI’s management structure and reporting relationships should be clear and transparent.

(b) Strengthen oversight of employees in material risk functions (defined by MAS as employees whose decisions or activities could materially impact a FI’s risk profile)

FIs should identify employees who have the authority to make decisions or conduct activities that can significantly impact the FI’s safety and soundness, or cause harm to a significant segment of the FI’s customers or other stakeholders. FIs should ensure that such employees are fit and proper and are subject to an appropriate incentive structure and effective risk governance.

(c) Embed standards of proper conduct among all employees

FIs should have in place a framework that promotes and sustains the desired conduct among employees. The conduct framework should articulate the standards of conduct expected of all employees and be effectively communicated and enforced throughout the organisation. Policies and processes should be implemented to ensure regular monitoring and reporting of conduct issues to the board and senior management. There should also be appropriate incentive systems and effective feedback channels, such as whistle-blowing mechanisms, in place.

The guidelines provide FIs with the operational flexibility to determine the most appropriate ways to achieve the desired outcomes of proper accountability and conduct. MAS will monitor FIs’ progress in implementing the guidelines through its regular supervisory engagements.

MAS is seeking feedback on the guidelines until 25 May 2018. The consultation paper can be found on the MAS website.

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