The FCA and PRA have now published a number of documents setting out some of the final rules for a new accountability framework for individuals working in 'relevant firms'; including banks, building societies, credit s and PRA-designated investment firms, as well as UK branches of overseas firms. A very similar accountability framework is also being introduced for larger insurance and reinsurance firms.

The Senior Managers Regime (SMR), Certification Regime (CR) and Conduct Rules are due to come into force on 7 March 2016. Though not all of the rules are finalised the regulatory framework is now much closer to completion following the recent publications.

The SMR focuses on individuals who hold key roles or have overall responsibility for whole areas of relevant firms and has no territorial limitation. The regulators expect that firms will have already begun preparations for the new regime including allocating and mapping out responsibilities and preparing Statements of Responsibilities for individuals carrying out Senior Management Functions. While individuals who fall under this regime will be approved by regulators, firms will be required to ensure that they assess the fitness and propriety of individuals both before applying for approval and at least annually thereafter.

The CR applies to other staff who could pose a risk of significant harm to the firm or any of its customers (for example, staff who give investment advice). Firms' preparations will need to include putting in place procedures for assessing for themselves the fitness and propriety of staff, for which they will be accountable to the regulators. These preparations will be important not only when recruiting for roles that come under the CR but when reassessing each year the fitness and propriety of staff who are subject to the regime.

The Conduct Rules are high level requirements (reflecting the core standards expected of staff working at relevant firms) that hold individuals to account. Firms' preparations need to include ensuring that staff who will be subject to the new rules are aware of the conduct rules and how they apply to them. Individuals subject to either the SMR or the CR will be subject to Conduct Rules from the commencement of the new regime on 7 March 2016. Firms will have a year after this, until 7 March 2017, to prepare for the wider application of the Conduct Rules to other staff. There will be a burden on firms to report both suspected and actual breaches of the Conduct Rules.

The Senior Insurance Managers Regime (SIMR), which in part seeks to put into effect parts of the requirements of Solvency II, will start to come into force from January 2016 with the rest of the rules due for March 2016 (alongside the SMR). Though the new individual accountability framework for insurance and reinsurance firms differs in some regards from the regime for other firms, similar preparations are required ahead of next year. All insurers who come within these new rules should be taking steps now to ready themselves for the changes because they will be criticised if they don't.

The regulators have emphasized that they consider that these changes will help to drive cultural change and an improvement in standards across financial services. This assumption is underpinned by the belief that if individuals feel that they are more likely to be held accountable for failures within a business for which they have responsibility, then these individuals will ensure that such failures do not happen.

In part these changes are about delivering good governance with clear lines of responsibility. However at the heart of these changes is the threat to individuals that they will be dragged through the enforcement process. Whilst few believe that there is a realistic prospect of any prosecutions being brought under the much lauded new criminal offence of reckless misconduct in managing a bank, it is inevitable that individuals will be enforced against for breaching the new rules. The identification of individuals with clearly defined responsibility will make it easier for the regulators to take direct action against those individuals. Additionally, and critically, there is a reversal of the burden of proof so that senior managers will need to explain why it was not their fault if a failure occurred on their watch.

The cards will be stacked more heavily in favour of the regulator. However individuals are far more inclined to contest the allegations against them and thus far the regulators have not been keen to take forward many cases involving individuals. As has been noted in the FCA's annual report "contested cases take a significantly longer time to resolve than settled cases." For example, in the annual report it is noted that in 2013/2014 the average for cases which were settled was that they were concluded within about 20 months and cost £208,000, whilst the average for cases which went to the tribunal was that they lasted about 62 months and cost £681,600. Though the figures for tribunal cases apparently came down in 2014/2015 there is still a significant disincentive for the regulator to pursue matters which it knows will probably be contested. However political pressure could well see the regulators forced to bring more cases against individuals.