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Eversheds comment: New UK NED regulations could help prevent next financial crisis
- United Kingdom
23-02-2015
Commenting on the proposals for a new stringent city code affecting certain non-execs Aleen Gulvanessian, partner and corporate governance specialist at law firm Eversheds, says:
“ The new regime is likely to make non-executive director (NED) candidates think long and hard about taking these key roles on the board or its committees. When we carried out our research for Eversheds’ Board Report of 2014 we found even then that a number of NEDs expressed reservations about joining a board in the financial services sector. However, it would by no means deter all good candidates and there is an argument to say the result may be more appropriate candidates with expertise or willingness to learn."
Andrew Henderson, partner and financial services regulation specialist at law firm Eversheds, says:
“Liability for the non-executive directors of banks and insurance firms under the financial services regulatory system is not new. On its final day as financial services regulator, the Financial Services Authority banned an NED of two mutual societies for failing to disclose conflicts of interests. However, more intensive regulatory scrutiny, a reversal of the burden of proof and potential criminal liability are new. To the extent that the new measures can, in fact, prevent the next financial crisis, they should benefit the stability of the financial system. However, this needs to be balanced against the chilling effect for banks and insurers, particularly new entrants to the market, on finding suitable candidates, as the PRA and FCA expect them to do.”
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.
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