LONDON (Reuters) - Standard Chartered’s recent decision to strip its finance director of responsibility for risk oversight was the result of intervention by Britain’s financial regulator, two sources with knowledge of the process said on Monday.
The Asia-focused bank said two weeks ago it would move responsibility for risk to Chief Executive Peter Sands from Finance Director Richard Meddings. This was because the Prudential Regulation Authority (PRA) expressed concern about a potential conflict with Meddings’ financial role, the sources said.
The intervention shows the PRA is becoming more active in stepping in when it is unhappy with banks’ internal structure, to ensure clear lines of accountability.
The PRA, part of the Bank of England, took responsibility for regulation and supervision of banks in April, assuming a more hands-on approach to respond to concerns expressed by lawmakers and taxpayers after the financial crisis that the country’s banking regulation had hitherto been too lax.
A report this year by the Parliamentary Commission on Banking Standards made proposals to improve lines of accountability for risk and said boards should protect the independence of the chief risk officer.
Britain is close to passing a banking reform bill aimed at improving industry standards, which includes replacing an approved persons regime with a system aimed at making top bankers more accountable for their actions and a broader register to license bankers.
Meddings has been Standard Chartered’s finance director since November 2006, responsible for finance, corporate Treasury, risk and corporate development. One of the sources said the PRA’s concern was not related to Meddings himself but to the structure within the bank, which could have led to a potential conflict of interest.
Standard Chartered’s CEO for risk, Richard Goulding, will report to Sands.
“This governance change ensures we are well placed to meet future regulatory requirements,” a spokesman for the bank said.
The PRA declined to comment.
Standard Chartered warned earlier this month that tougher regulations were one of the factors contributing to a slowdown in profits. It said that 10 years of record earnings were likely to end this year due to this, as well as losses in Korea and a slowdown in its key Asian markets.
Reporting by Steve Slater; Editing by Sophie Walker