Under the Financial Services (Banking Reform) Act 2013, the new regime will apply to:

In addition, the Treasury intends to consult on a proposed extension of the regime to UK branches of overseas banks. The FCA proposes to consult on that issue once the outcome of the Treasury consultation is known.

The FCA and the PRA have proposed that the new senior managers regime will cover members of a bank's board, and the FCA envisages that executive committee members (that is, the layer of management below board level) will also be covered.

Other individuals falling within the senior managers regime include:

Senior managers will have to be pre-approved by the FCA or the PRA. The FCA and the PRA propose that individuals who have been authorised as approved persons and who fall within the scope of the senior managers regime will be "grandfathered", meaning that they will not need to obtain further approval to perform the equivalent senior management function.

The application for approval must be accompanied by a statement of responsibilities setting out the areas of the bank for which that person will be responsible. This must be updated and resubmitted to the relevant regulator whenever there is a significant change in a person's responsibilities.

The consultation also proposes to require banks to prepare a responsibilities map setting out their framework for the allocation of responsibilities and their management and governance arrangements. Banks will be required to maintain and update responsibilities maps as necessary and a bank's board will have to confirm to the regulators annually that there are no gaps in its allocation of responsibilities.

Under the definition of misconduct, for which the regulators can hold individuals liable, the burden of proof is reversed so that if a regulatory contravention occurs in an area of the business for which a particular senior manager is responsible, he will be guilty of misconduct unless he can show that he took such steps as a person in his position could reasonably be expected to take to avoid the contravention occurring (or continuing).

In light of this additional ground of liability for senior managers, the statement of responsibility for senior managers will be important in defining their potential liability. The drafting and maintenance of statements of responsibilities and responsibilities maps will therefore require a great deal of care by banks and the individuals concerned in view of the potential consequences should there be a regulatory contravention or failure within a senior manager's area of responsibility.

The certification regime will apply to employees performing a role that is not a senior manager role but, in the PRA's or the FCA's view, poses the risk of significant harm to the bank or its customers, including those employees who are certain material risk takers. It will cover a broader group of individuals than those covered by the approved persons regime.

In practice, the certification regime will apply to a wide range of individuals including: employees accountable to the board for risk management, compliance and audit; heads of legal and finance; employees able to commit the bank to significant transactions; and employees whose remuneration meets certain thresholds.

Banks will be required to certify to the FCA and the PRA that employees subject to the certification regime are fit and proper to carry out their functions. The FCA and the PRA propose that banks should have a 12-month period from the start of the certification regime to issue individuals their first certificate of fitness and propriety. The consultation sets out proposals as to the evidence that banks will be required to collect as part of their assessment process. For new employees, banks will be required to undertake significant due diligence, including obtaining employer references and information about unspent criminal convictions.

The new PRA conduct rules and FCA conduct rules will be substantially similar to each other (although two rules, dealing with fair treatment of customers and proper standards of market conduct, will be FCA conduct rules only). The conduct rules will draw on the existing statements of principle for approved persons so the changes to banks' compliance procedures and manuals should be limited.

The PRA conduct rules will apply only to senior managers and individuals within the PRA's certification regime.

The FCA conduct rules will apply to all employees other than those who perform a role that is not specific to a bank's financial services business (for example, personal assistants and receptionists).

Banks will be required to notify the relevant regulator if they take disciplinary action against a person for breach of the conduct rules or if they know of, or suspect, a breach.