FSA drops training and competence rules for wholesale banking staff

The Financial Services Authority (FSA) is relaxing regulations on the training and competence (T&C) of staff working in wholesale financial services firms despite its earlier warnings that organised gangs of criminals are infiltrating British banks to commit large scale frauds.

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FSA drops training and competence rules for wholesale banking staff


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In November the FSA said there was evidence that organised crime groups deliberately placed agents inside banks to commit crime, particularly identity theft and urged firms to carefully screen new staff.

But despite the growing security concerns, the regulator says its detailed T&C rules will not apply to people who deal only with wholesale or non-private customers as of next year. The FSA is also dropping compulsory examinations for staff in the wholesale markets.

The changes mean that senior management will be left to decide whether employees are adequately trained and suited to their roles.

Andrew Whittaker, FSA general counsel, says: "Our decision to remove examination requirements from individuals in the wholesale markets reflects our aim to move to a more principles-based approach by allowing wholesale firms to take their own decisions about the competence of their staff."

The changes are part of the FSA's initiative to reduce red tape for businesses.

Last July the FSA proposed ditching the central approvals system for traders, fund managers and sales staff working in wholesale financial markets in July last year.

That proposal drew criticism from a number of industry bodies - including the London Investment Banking Association, the British Bankers' Association, the UK Society of Investment Professionals and the Securities & Investment Institute and City of London police - which were concerned that the removal of detailed rules for wholesale business could lead to a lowering of standards.

In it's statement the regulator acknowledged the concerns but says they are "largely based on a misunderstanding of how the T&C regime currently works".

"These changes will not alter the standards of competence expected of firms and how these standards will be maintained," says the FSA.

The removal of the T&C rules for wholesale business will be introduced in November 2007, at the time that the European Union's Markets in Financial Instruments Directive (MiFID) is expected to be implemented. The regulator says it will also conduct a wider review of its T&C regime that will take account of the impact of MiFID.

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