From the Regulators

Regulators to examine the problem of employees that leave one firm amid suspected misconduct, only to turn up at another firm in the industry

By James Langton |

Global policymakers plan to look at ways to hold senior personnel more directly accountable, and to address the problem of rogue employees remaining in the financial industry.

The Financial Stability Board (FSB) on Tuesday published a report today that details the work done so far in various countries to improve industry governance as a way of preventing misconduct. The report also sets out areas for further work by the FSB that may result in guidance for the industry.

In particular, the FSB plans to examine the problem of "rolling bad apples" — which are employees that leave one firm amid suspected misconduct, only to turn up at another firm in the industry. "This work will try to define and size the problem and explore the current and potential uses of governance frameworks to make employee screening and due diligence more effective," the FSB says in a news release.

The FSB also intends to study the practice of regulators requiring firms to identify the responsibilities of specific senior individuals, and how this "could be used to mitigate misconduct risk, including through supervisory examination or enforcement practices focused on the legal and regulatory requirements applicable to those individuals."

The board also that it will look at how firms' governance mechanisms, such as escalation processes, training, and non-financial incentive arrangements, "may mitigate misconduct risks posed by the culture of a firm."

A final report on this work will be published in March 2018. The FSB also plans to publish a progress report on its overall misconduct work ahead of the G20 summit in July.