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  • Daniel Lawlor

SEAR: A GAME CHANGER - But not how you expect

Updated: Dec 12, 2019

The imminent arrival of the Senior Executive Accountability Regime is getting much airplay at the moment.  We are seeing senior representatives from the Central Bank of Ireland popping up at all manner of industry events with a clear and strong message - SEAR is coming next year so get ready.



The Central Bank has been flagging the importance of diversity, culture, behaviour and challenge for at least 4 or 5 years now.  The SEAR concept is born out of that and was first raised about 18 months ago in the Central Bank’s report on ‘Behaviour and Culture of the Irish Retail Banks’.  



Why SEAR?  In the Central Bank’s own words,


“The Central Bank has proposed the introduction of SEAR to enhance governance and support accountability.  We suggest that senior executives submit a statement of responsibilities making clear the duties for which they are accountable.  This will support good culture and better outcomes for consumers in financial services.” 


THE USUAL SANCTIONS ARE NOT CUTTING IT, SO....


To my mind, the message here is that sanctioning firms as a whole is not a sufficient deterrent to change poor behaviours - if you really want to change culture and behaviour, individuals within those firms must be held accountable.  To that end, the Central Bank wants to make it easier to sanction senior executives.   



So you might expect that the major impact of SEAR will be to see more senior executives taken to task for their actions by the Central Bank and sanctioned accordingly.  Expect any such sanctions to be published broadly - terrible for the reputation of the individual involved but a seriously effective way for a regulator to get their message across.


YOUR PERSONAL BRAND MATTERS, A LOT


While sanctioning of some senior executives will be an outcome of SEAR, I don’t think it will be the main one.  I think the impact will be more subtle and much more profound. Because what SEAR really does is bring home the importance of preserving your personal brand.


A blot on your copybook (for example, being involved in a firm that experienced issues) can come back to bite when you look for Central Bank clearance to take up a new role.  The Fitness & Probity regime is already quite challenging. Now add to that the possibility of being held individually accountable and sanctioned in your own right for your part in a firm’s misbehaviour - try getting F&P clearance if that is in your personal history.  


More than ever, senior executives have to be aware of the damage that can be done to their personal brand, and their future career potential, if they are involved in a firm that misbehaves.  Put simply, senior executives simply cannot afford this risk. Where they identify risks or weaknesses in a firm, they must call it out and have the issue addressed. For their own sake, if nothing else.



REGULATED FINANCIAL SERVICES FIRMS, TAKE HEED


What if you are a senior executive in a firm where, for example, your pleas for support from HQ are falling on deaf ears.  Everything is a battle and every ask for an additional resource is tortuous. In that instance, or where there is a pattern of HQ failing to support local management to do what is necessary, then I believe that a senior executive has no real choice but to walk away.  They simply cannot afford to endure an ongoing situation which may result in them being sanctioned.


To add spice to the mix, remember that the Central Bank has to be informed of the reason for a person’s resignation under F&P.  You can just imagine how that might play out where someone has felt the need to resign because of lack of support from HQ.

So SEAR will be a game changer.  Not because the Central Bank sanctions tons of senior executives - although there may be a few.  But because senior executives will have to insist on support to address weaknesses and plug compliance gaps or else they will have to walk away for the sake of their own future careers in the financial services industry.  


HQ MAY NEED SOME TIME TO APPRECIATE THE FULL IMPACT, BUT THEY SHALL COME AROUND.


It might take HQ a little time to figure out the real impact of SEAR.  But will all of the Central Bank’s current messaging around SEAR, senior executives have no excuse but to be ready for it from the get go.      




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