The guidelines aim to strengthen the accountability of senior managers in financial institutions.
By Farhana Sharmeen and Marc Jia Renn Tan
On 10 September 2020, the Monetary Authority of Singapore (the MAS) issued guidelines (the Guidelines) to strengthen the accountability of individuals who are employed by, or acting for or by arrangement with, financial institutions, and are principally responsible for the day-to-day management of key functions in financial institutions (Senior Managers), and to promote ethical behaviour in financial institutions. The MAS also issued its response to frequently asked questions on the Guidelines (the FAQs) as well as an information paper on good practices in these areas (the Information Paper) gathered from a thematic survey and dialogue sessions conducted by the MAS with banks, insurers, and capital markets intermediaries.
The Guidelines, which will become effective on 10 September 2021, aim to support financial institutions by setting out a framework and best practices for bolstering accountability and conduct standards. They are not meant to be exhaustive or prescriptive. To foster a strong culture of responsibility and ethical behaviour in financial institutions, the MAS has set out its expectations in the following five areas (the Outcomes):
- Senior Managers responsible for managing and conducting the financial institution’s core functions are clearly identified.
- Senior Managers are fit and proper for their roles, and held responsible for the actions of their employees and the conduct of the business under their purview.
- The financial institution’s governance framework supports Senior Managers’ performance of their roles and responsibilities, with a clear and transparent management structure and reporting relationships.
- Individuals who have the authority to make decisions or conduct activities that can significantly impact the financial institution’s safety and soundness (or cause harm to a significant segment of the financial institution’s customers or other stakeholders) are “fit and proper for their roles, and subject to effective risk governance, and appropriate incentive structures and standards of conduct”.
- The financial institution has a framework that promotes and sustains among all employees the desired conduct.
Financial institutions should avoid adopting a check-box mentality in applying the Guidelines. Instead, they should carefully review the Guidelines and make adjustments based on the scale, nature, and complexity of their business. Financial institutions with fewer than 50 employees do not need to apply the Guidelines, but they should still achieve the Outcomes.
Financial institutions should use the guidance in the Guidelines, the FAQs, and the Information Paper to develop and entrench a strong culture of responsibility and ethical behaviour within their organisations. MAS will continue to engage financial institutions, their boards, senior management, and other employees on the adequacy and effectiveness of their culture and conduct practices through its ongoing supervision.
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