The City watchdog sharply reduced its scrutiny of top recruits to banks and other financial services companies this year after concluding that its tough regime was taking up staff time and putting off potential applicants.
So far this year, 145 of the 6,071 candidates for chief executive, finance director or other “significant influence functions” have been subjected to review by a special team at the Financial Services Authority.
The share of cases sent for review – 2.3 per cent – is down sharply from 5.7 per cent in 2011 and 7.3 per cent in 2010.
Even fewer candidates – 1.9 per cent – have been called for interview, down from 4.6 per cent last year.
The retreat reflects a deliberate decision by the FSA that its toughest scrutiny should be focused on the top managerial roles at the very biggest financial institutions and on senior independent directors and board members with direct responsibility for risk and finance.
Other board members, such as chief operating officers and ordinary non-executive directors, are now being approved without interview if their qualifications appear to stack up. Most officials at midsized financial groups are also receiving the FSA’s stamp of approval without extended scrutiny.
“The crisis brought home to us how important it is that the people at the top of an organisation are competent, capable, honest and act with integrity. The FSA conducts a stringent vetting process,” said Victoria Raffé, FSA director of authorisations.
“Earlier this year we took the decision to reserve the most intrusive part of our vetting process, the SIF interview, for the most senior positions and for where our checks have identified significant risks or issues about either the candidate or firm,” she added.
The shift comes after three years in which the watchdog experimented with extremely high levels of scrutiny for up to 570 candidates a year. Between late 2008 and mid-2011, about 7 per cent of SIF candidates pulled out during the process, including nearly 10 per cent of would-be chief executives.
Financial groups complained that the process was so daunting that some potential director candidates were refusing to apply. Hector Sants, then FSA chief executive, also concluded that the crush of additional work had led in some cases to interviews being conducted by insufficiently experienced FSA staff.