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Getting in shape for Brexit

Getting in shape for Brexit

For a small but important group of senior bankers, Brexit could bring the first taste of SSM supervision. That will pose some significant personal challenges. Priorities should include understanding the rules, customs and language of the SSM; documenting relevant professional experience; and preparing for licensing interviews and 'fit and proper' tests.

As they look ahead to 2019, many banking professionals will be planning a new fitness regime for the New Year. But, as we all know, getting started in the dark days of January can be difficult. To boost their motivation, some may set themselves a challenge, such as entering a half marathon.

Of course, the decision to get physically fit is a personal choice. 2019 is also likely to present a number of senior bankers with a more professional challenge - Brexit. For many senior bankers, Brexit represents the greatest professional change of their career.

As we approach the end of 2018, the possibility of a 'hard Brexit' is looking more likely than ever. In response, many banks are on the point of activating their contingency plans for a 'no-deal' scenario. For some, this will mean pressing ahead with the use of new legal entities and their associated operating structures.

These initiatives, discussed until now in administrative terms, will soon begin to have a real human impact. A significant number of senior bankers face the prospect of moving to new markets, or of changing their legal status; for example, from being the manager of an office to becoming the director of a subsidiary.

In either case, key individuals falling under the Single Supervisory Mechanism (SSM) for the first time can expect - and should prepare for - increased personal scrutiny.

First, when a new banking licence is sought, senior managers and directors need to submit personal details of their skills, knowledge and experience to the relevant National Competent Authority (NCA). Directors can also expect to be interviewed by NCAs or the ECB as part of the licence application process.

Second, bankers occupying senior management roles should be prepared for the ECB's regime of management scrutiny. Key areas of focus include the function and effectiveness of boards; their discussion and documentation; their oversight of key controls; their independence; and their collective levels of knowledge and diversity.

Third, senior managers entering the ECB's oversight need to ensure they can 'speak the language of the SSM'. A ready understanding of the terminology and technical features used by the ECB and their local supervisor will be essential to a successful transition.

Fourth - and perhaps of greatest personal significance - bankers occupying senior executive positions will need to meet the ECB's 'Fit and Proper' requirements, which include requests for written information and face-to-face interviews. In brief, the ECB's five key fit and proper criteria cover:

  • Knowledge, skills and experience: Does the candidate have the necessary skills to assume a specific role in the bank?
  • Reputation: Does the candidate have a criminal record or a history of administrative or tax irregularities? Is the candidate involved in pending legal proceedings?
  • Conflict of interest and independence in mind: Does the candidate have any conflicting interests that may adversely affect the bank?
  • Time commitment: Does the candidate devote sufficient time to the proposed function within the bank?
  • Collective suitability of the board? How does the candidate fit within the overall composition of the board?

Like a New Year exercise programme, the personal requirements of Brexit may seem daunting. The goals are demanding and the advice of peers may be confusing, or even contradictory. The good news is that, as for sport, practice makes perfect. Key individuals can take a range of tangible steps to prepare themselves for life within the SSM, such as completing tailored training, workshops or simulation interviews with JSTs. If they wish to, they can also test their progress using KPMG's comprehensive guide to entering SSM supervision - an interactive resource with key facts, important questions and links to more detailed information. Readers can view a short excerpt from the guide here.

With the right support and preparation, senior bankers can make a good start on the personal challenges of Brexit. A boost in confidence should help key individuals to 'train hard and win easy'.

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