FCA whistleblowing rules extended to UK branches of overseas banks from September

The new rules will require UK branches of overseas banks to tell their UK-based employees about the whistleblowing services offered by the FCA and by the Prudential Regulation Authority (PRA). UK branches of 'subsidiary' overseas banks, with a sister or parent company that is subject to the UK whistleblowing rules in its own right, must tell their staff that they are able to use the sister or parent company's whistleblowing arrangements, according to an FCA policy statement.

The rules will be accompanied by guidance reminding branches that they may continue to have concurrent reporting obligations to their home state regulator. This is intended to address concerns raised by respondents to the consultation that it would be easier to require staff to report any issues to their home regulator or head office first, according to the FCA.

Financial regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that branches would now need to "fully understand the thought process behind the FCA's focus on whistleblowing" ahead of the entry into force of the new rules, on 7 September 2017.

"This follows on from criticism the regulator received in 2014 from the Parliamentary Commission on Banking Standards," he said.

"UK branches should identify how they are going to educate employees about the new regime and ensure they have appropriate systems and controls internally to promote whistleblowing whilst protecting those who do blow the whistle. A key challenge for branches is the likelihood that they will have concurrent reporting obligations to their home state regulator," he said.

Ruck also noted that the FCA had rejected a suggestion that it offer financial incentives to whistleblowers who come forward with information, as is the case in the US. This "leaves the door open for questions as to whether the newly-extended regime will actually result in an increase in whistleblowing reports given the recent drop in such reports to the FCA, or better quality reports", he said.

The statement on whistleblowing was one of a number of finalised policy statements published by the FCA this week, many of which dealt with different aspects of the Senior Managers' and Certification Regimes (SM&CR). These include the extension of the conduct rules under the new regime to all non-executive directors (NEDs) of banks and insurers; and guidance for senior managers about how the FCA will enforce their 'duty of responsibility'.

The FCA has also made changes to its rules around remuneration for staff at banks subject to the EU's recast Capital Requirements Directive (CRD IV). It has aligned its rules with those in the European Banking Authority (EBA) guidelines on sound remuneration policies, and published new non-Handbook guidance on frequently asked questions.

Under the SM&CR, UK banks have been obliged since September 2016 to put mechanisms in place to encourage their employees to raise any concerns about possible dishonest or illegal behaviour within the firm internally and to regulators. They have also been required to appoint a senior manager as a 'whistleblowers' champion', responsible for the effectiveness of these arrangements.

The SM&CR came into force in March 2016, and is designed to make it easier for the regulators to hold senior individuals within banks personally accountable for failings on their watch. The 'senior managers' part of the new regime gives named individuals within firms the responsibility for certain areas of the business, while the 'certification regime' requires firms to assess the fitness and propriety of staff in certain roles.

The regime also includes new conduct rules, which set out basic standards of good conduct for staff at banks, building societies and PRA-regulated investment firms. These will be extended to NEDs of banks and insurers from 3 July 2017, according to the FCA policy statement.