Europe a hotchpotch of testing regimes for bankers

Sun Jul 7, 2013 8:59am EDT
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By Laura Noonan

LONDON (Reuters) - Five years after mismanagement brought the global financial system to the brink of collapse, a Reuters survey reveals yawning differences in the way European Union countries assess whether bankers are up to the job.

In a continent where executives have made headlines for contributing to the failure of their banks - British CEOs Fred Goodwin of RBS and James Crosby of HBOS were stripped of their knighthoods, and in Spain former Caja Madrid chairman Miguel Blesa was briefly jailed as part of an investigation into the bank - most countries now vet bankers before they take on key roles.

But a lack of coherence across the block in how nations decide whether senior banking figures are "fit and proper", how many bankers they assess and how likely they are to get a clean bill of health, demonstrate a work still very much in progress, and show just how hard it will be for the EU to create a banking union with a level playing field for all 28 members.

The European Banking Authority (EBA) lacks the power to insist upon convergence, and there is no guarantee that the European Central Bank will be much better placed when it assumes supervision of the euro zone's banks next year.

The most striking difference in the 23 countries examined by Reuters is how deep into the organizations the checks go. While some examine only the most senior managers and directors, others go all the way down to traders and other risk takers.

In theory a senior banker drummed out of the industry after failing an assessment in one country could flit to a similar role in another EU member where he or she might face no scrutiny at all, even for a key function such as chief financial officer.

The UK, which has the largest financial services industry in the EU, puts everyone in a "control" function through the tests, a definition that can encompass more than a thousand staff in the largest banks, capturing anyone taking on significant risk. More than 225,000 financial services workers - spanning bankers, insurers and asset managers - were assessed there in the four and three quarter years to end 2012.

The UK's financial and professional services sector employs over 2 million, according to TheCityUK, which represents the industry.   Continued...

Tower Bridge and the Canary Wharf financial district (at rear) are seen at dusk in an aerial photograph from The View gallery at the Shard, western Europe's tallest building, in London January 8, 2013. REUTERS/Andrew Winning