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The Basel Committee on Banking Supervision under the auspices of the Bank for International Settlements (BIS) published a consultation paper in late 2003 on the compliance function in banks. The aim of the consultation paper is to set out the views of banking supervisors and provide basic guidance for banks. Whereas there is no attempt to prescribe a uniform approach, a clear set of general principles is laid down for the role of the compliance function within banking organisations. Furthermore, recognition is given to the fact that diversity exists between banks with respect to their internal organisation of the compliance function and also to diversity in the legal and regulatory environment affecting the compliance function across jurisdictions. The core objectives of this paper are to examine the BIS approach to the compliance function and look at how this is likely to evolve. The authors draw on experience from the UK life assurance industry where substantial inroads have been made to embed a compliance competent culture within such types of financial institutions. A partnership approach is highlighted as essential to achieving a viable and meaningful compliance function. Finally, an ethical approach is explored as the possible future direction for banks. The first section reviews the new principles for the compliance function; the second section describes issues that arise; the third section analyses a partnership approach and explores an ethical approach; and the final section provides a summary and conclusion.
The PRIME contract is revolutionising the property industry. It has enabled the UK Government’s Department of Social Security to outsource not just its facilities…
The PRIME contract is revolutionising the property industry. It has enabled the UK Government’s Department of Social Security to outsource not just its facilities management and property management but also its entire property portfolio and the risks associated with it. PRIME will provide the Department with 22 per cent cost savings over the life of the contract, give it the flexibility to downsize its portfolio to 60 per cent of its original size and replace hundreds of separate service provision contracts with one service provider, Trillium. Trillium is one of the new types of property service providers who are taking advantage of the historical failure of traditional property owners to give occupiers what they want in terms of service and flexibility. The implications for corporate real estate are enormous ‐ who better to deal with occupier problems like surplus space, flexibility, property market risk and service quality than the supply side of the industry. The potential benefits for those property providers on the supply side who are positioned to take advantage are substantial ‐ instead of just rental income from one property for one occupier, there is the opportunity to capture all occupancy cost revenue for an entire portfolio. The occupier can potentially save costs, increase flexibility, reduce risk and more closely align its corporate real estate with its business strategy.
Compliance is key to the operation and reputation of the financial services sector and is now completely embedded in the way financial services organisations carry on investment business. It is also fundamental to the Financial Services Authority (FSA) in seeking to achieve its regulatory objectives as set out in SS. 3‐6 of the Financial Services and Markets Act 2000. A great deal has been written on the topic of compliance and the core objective of this paper is to review and comment on the current approach to compliance which has evolved since the introduction of the Financial Services Act 1986. It notes the change of emphasis by the FSA from individual compliance competence to organisational compliance competence. It focuses on conduct of business regulation and highlights the importance of training and competence to compliance and explains how the regulatory approach has been changing from a rules‐based approach to a more flexible ethical one.
This paper considers the meaning of the term ‘compliant competent life assurance companies’, within the current regulatory regime. It defines the terms of competence and…
This paper considers the meaning of the term ‘compliant competent life assurance companies’, within the current regulatory regime. It defines the terms of competence and compliance in the context of the change of emphasis from individual to corporate compliance competence. It recognises the importance of the introduction of competence within the financial sector and especially the role of the training and competence scheme for individuals, introduced after the Financial Services Act 1986. It considers the Financial Services Authority’s (FSA’s) more expansive interpretation of compliance competence in the context of life assurance companies, following the creation of the single regulator that aims to achieve the stated objectives of the Financial Services and Markets Act (FSMA) 2000. It reviews and critically analyses key issues associated with the FSA’s move towards an ethical framework for financial services.
This paper, set in the context of a rationale for financial regulation, considers how the Financial Services Authority’s (the regulator) approach to establishing…
This paper, set in the context of a rationale for financial regulation, considers how the Financial Services Authority’s (the regulator) approach to establishing compliance competent organisations in the life assurance sector (the regulated) has evolved from a prescriptive approach to one of cooperation with those regulated, in order to establish a working partnership. It focuses on investment business and the resulting importance of conduct of business regulation. It reviews the regulator’s approach, linking academic theory to existing practice and the progress made in the developing and evolving relationship between the regulator and the regulated. It establishes what steps/phases have already taken place within life assurance companies seeking to incorporate and change their compliance culture. It creates a template for the review of progress in seeking to achieve the regulator’s goal of compliant competent organisations, while identifying the essential elements of the new partnership approach. This approach will not only meet the regulator’s stated aim of improving consumer protection but also benefit life assurance companies themselves.
The concept of outsourcing is a recognised business planning strategy; senior corporate management and facilities services have been progressively outsourced in the UK for…
The concept of outsourcing is a recognised business planning strategy; senior corporate management and facilities services have been progressively outsourced in the UK for many years. However, transforming an outsourcing business plan into an effective and balanced operating contract remains challenging. Getting your outsourcing project properly positioned in the business, procuring the right integrated facilities contractor and then subsequently mobilising and managing the contract can be a difficult journey to navigate. This paper describes how to approach the principles and practicalities of outsourcing noncore services and how to make sure that some of the principal pitfalls along the road of the outsourcing project are avoided. It finally offers some ideas on how to get the most out of a project in the long term.
Compliance competence is key to the operation and reputation of the financial services sector and is now completely embedded in the way financial services organisations…
Compliance competence is key to the operation and reputation of the financial services sector and is now completely embedded in the way financial services organisations carry on investment business. It is also fundamental to the Financial Services Authority (FSA) in seeking to achieve its regulatory objectives as set out in sections 3‐6 of the Financial Services and Markets Act 2000. A great deal has been written on the topic of compliance and competence and the core objective of this paper is to offer a compliance competence model for financial institutions that recognises and highlights the importance of the regulator and the regulated working together as partners.
A unique compliance competence partnership approach model, arising from case study research, is proposed and consists of three key elements: good compliance practice, good ethical practice and a positive FSA relationship. The three elements are represented as a tripod with three mainstays that are intrinsically linked. The mainstays are supported by cross‐members that consist of underlying and intrinsic issues of compliance competence.
The regulator and regulated need to work together in a proactive partnership. Organisation need to formulate a clear ethical policy involving employees from every aspect.
The partnership approach model, advocated here, would create a real partnership between the FSA and its regulated organisations.
This paper discusses concepts of value from the point of view of the user of the space and the counter view of the provider of the same. Land and property are factors of…
This paper discusses concepts of value from the point of view of the user of the space and the counter view of the provider of the same. Land and property are factors of production. The value of the land flows from the use to which it is put, and that in turn, is dependent upon the demand (and supply) for the product or service that is produced/provided from that space. If there is a high demand for the product (at a fixed level of supply), the price will increase and the economic rent for the land/property will increase accordingly. This is the underlying paradigm of Ricardian rent theory where the supply of land is fixed and a single good is produced. In such a case the rent of land is wholly an economic rent. Economic theory generally distinguishes between two kinds of price, price of production or “value in use” (as determined by the labour theory of value), and market price or “value in exchange” (as determined by supply and demand). It is based on a coherent and consistent theory of value and price. Effectively the distinction is between what space is “worth” to an individual and that space’s price of exchange in the market place. In a perfect market where any individual has access to the same information as all others in the market, price and worth should coincide. However in a market where access to information is not uniform, and where different uses compete for the same space, it is more likely that the two figures will diverge. This paper argues that the traditional reliance of valuers to use methods of comparison to determine “price” has led to an artificial divergence of “value in use” and “value in exchange”, but now such comparisons are becoming more difficult due to the diversity of lettings in the market place, there will be a requirement to return to fundamentals and pay heed to the thought process of the user in assessing the worth of the space to be let.
To provide a practical insight into the Financial Services Authority's (FSA) “Treating Customers Fairly” (TCF) initiative for financial services firms endeavouring to implement such an approach.
This qualitative paper subjectively considers the TCF initiative in the context of the wider ethical approach to financial services by drawing an analogy with the FSA's earlier initiative in seeking to establish an ethical framework for financial services. Reference is made to recent practitioner literature and supported by key academic literature where appropriate.
The paper highlights the FSA's aim of adopting a high‐principled regulatory approach to TCF as a real alternative to highly prescriptive rules. It consider the scope of TCF and the inherent practical implications for firms seeking to implement such a policy by drawing an analogy between TCF and the ethical framework for financial services.
The paper is a useful insight into TCF from a critical, practical perspective and is part of a wider organizational cultural change debate which may be developed as the experience of the FSA and those it regulates matures.
The paper suggests that TCF is part of a greater need for the FSA and financial services firms to review their business in terms of an ethical approach, which in turn requires them to consider organizational cultural change.
The paper questions the FSA's strategic approach to embedding fairness in a firm's value system as part of TCF, rather than recognizing the TCF is a major component of the broader and more beneficial goal of changing a firms's ethical culture.