SINGAPORE - Guidelines to strengthen the individual accountability of senior managers and raise standards of conduct in financial institutions were spelt out by the Monetary Authority of Singapore (MAS) on Thursday (Sept 10).
The 23-page document comes in the wake of the Global Financial Crisis in 2008, mirroring efforts across the world to instil a culture of personal accountability to prevent history from repeating itself.
Outcomes that the central bank hopes to see include clearly identifying senior managers responsible for managing and conducting the core functions of the financial institutions.
The high-level staff must also be "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 MAS guidelines said.
The guidelines will apply in full to all financial institutions unless they are exempted or if the firms have fewer than 50 staff.
The work of senior managers at banks and financial institutions came under the spotlight after the GFC as countries sought explanations for how the crisis occurred.
The Centre for Economic and Social Rights in the United States pointed out that the systemic lack of accountability among financial institutions contributed to the crisis, though another key factor was growing income and wealth inequality.
"Moral hazard, flawed incentives and the abdication of personal or institutional responsibility for the downside costs of financial activities is no doubt a related contributing factor to the financial crisis," according to the centre's website.
Financial institutions feared no meaningful sanctions or corrective actions enforced either by the market or government, it added.
The latest MAS guidelines come after refinements to a consultation paper introduced in April 2018 and follows feedback to it.
They are accompanied by a 17-page information paper on how banks and financial institutions can instil ethical behaviour in areas such as hiring, communication channels, monitoring and assessment, and performance management.
Best industry practices include setting up an ethics and conduct board committee, chaired by the financial institution's chairman; offering workshops for middle management staff; and having senior management involved in hiring processes to ensure cultural fit.
The information paper also contains a reminder that the MAS will take supervisory or enforcement actions against banks and financial institutions if lapses are found, ranging from warning letters to the removal of directors or executive officers.
CIMB Private Banking economist Song Seng Wun said that the guidelines serve as a "useful reminder to financial institutions not to take their eyes off corporate governance and risk management controls".
Asian banks have learnt their lessons since the Asian Financial Crisis in 1997, and the ensuing GFC and the latest MAS guidelines have all emphasised the importance of staying vigilant, he added.