MAS Finalises Individual Accountability and Conduct Guidelines

Financial institutions are expected to strengthen senior manager accountability and promote a culture of ethical behaviour. The guidelines take effect on 10 September 2021.

MAS (Monetary Authority of Singapore) has issued guidelines to strengthen the senior manager accountability and promote ethical behaviour at financial institutions (FIs).

The guidelines take into account MAS’ proposals in April 2018 and July 2019 consultations, and the responses to feedback received, available here and here.

The IAC (Individual Accountability and Conduct) Guidelines set out MAS’ expectations through five high level outcomes for FIs:

Outcome 1: Senior managers responsible for managing and conducting the FI’s core functions are clearly identified.

Outcome 2: 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.

Outcome 3: The FI’s governance framework supports senior managers’ performance of their roles and responsibilities, with a clear and transparent management structure and reporting relationships.

Outcome 4: Material risk personnel are fit and proper for their roles, and subject to effective risk governance, appropriate incentive structures and standards of conduct.

Outcome 5: The FI has a framework that promotes and sustains among all employees the desired conduct.

Specific guidance and a set of FAQs have also been provided to help FIs achieve the five outcomes.

FIs should also promote a culture of ethical behaviour by strengthening practices in other areas set out in an information paper covering culture and conduct practices of FIs. These include hiring, communication channels, monitoring and assessment, and performance management.

The information paper also contains examples of good practices gathered from a thematic survey and dialogue sessions conducted by MAS with banks, insurers and capital market intermediaries.

“FIs should use the guidelines and the guidance in the information paper to develop and entrench a strong culture of responsibility and ethical behaviour within their organisations,” MAS said in a statement.

MAS will continue to engage FIs, their boards, senior management and other employees on the adequacy and effectiveness of their culture and conduct practices through its ongoing supervision.

The IAC Guidelines, available here, will take effect on 10 September 2021.

“A significant amount of work will need to be undertaken by FIs to achieve the five conduct outcomes, particularly in light of the challenges posed by the ‘new normal’ to the management of culture and conduct risk,” said Natalie Curtis, a partner at law firm Herbert Smith Freehills.

In her experience, similar regimes in other jurisdictions have generally taken longer than expected to implement. “The 12-month transition period will fly by,” Curtis said.

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