PRA & FCA - Whistleblowing in deposit-takers
Response to the consultation
Q1. Do you agree that the requirements should apply to these firms?
We agree that employees in the deposit-taking sector should have an effective mechanism to raise concerns and should be protected against detrimental treatment resulting from blowing the whistle. We also agree that flexibility should be afforded to smaller institutions to establish best practice whistleblowing policies appropriate to the size of their firm.
Currently, the proposals set out in the consultation exempt small credit unions (those under £25 million in assets) from the requirements, including the requirement to allocate the “whistleblowers’ champion” role to a senior manager. The whistleblowing proposals explicitly identify this £25 million asset threshold with the thresholds operative under the Senior Managers Regime.
In light of the PRA Policy Statement 3/15, we would appreciate clarification as to whether this threshold for exemption from whistleblowing requirements will be revised upwards to £250 million in assets pursuant to the threshold used for the simplified Senior Manager’s Regime outlined therein. The FCA’s feedback statement on the Senior Managers Regime included a commitment to align their thresholds for the full regime with that of the PRA, therefore the £250 million threshold is relevant for both regulators in respect of Senior Managers which provides a clear rationale for doing so in respect of the whistleblowing requirements also.
Even the largest credit unions in the UK would be considered small firms as defined by the Companies Act 2006. With staff teams of no more than a maximum of around 30 people, to require the full whistleblowing apparatus for credit unions, without providing flexibility would present a disproportionate burden since the benefits of such a framework would not accrue to such a small firm.
Q2: Do you agree that all UK-based employees of relevant firms should be informed about the whistleblowing services run by the PRA and the FCA?
We agree that all UK based employees of relevant firms should be informed about the whistleblowing services run by the PRA and the FCA.
Q3 Do you agree that firms’ whistleblowing arrangements should cover all types of disclosure, not just those related to regulatory matters or protected disclosures under PIDA?
We agree in principle that firm’s whistleblowing arrangements should cover all disclosure types and topics relating to a genuine concern. We agree that whistleblowers should feel comfortable speaking up and mistreatment of whistleblowers, regardless of the nature of their disclosure, should be prevented. However, there is higher potential for abuse of whistleblowing procedures as a result of the more open definition of a reportable concern. Whistleblowing requirements therefore should take into account, and provide for, potential abuse of the procedure e.g. false disclosures made for personal gain.
Q4: Do you agree firms’ whistleblowing arrangements should be available to all individuals, and that protections should apply to all individuals making disclosures, not just employees or those who benefit from protections under PIDA?
We agree with the proposed range of individuals entitled to use a firm’s whilstleblowing facilities.
Q5: Do you agree that settlement agreements and employment contracts reached by a firm with a UK worker must contain a passage clarifying that nothing in that agreement prevents the worker from making a protected disclosure? Should firms be required to impose the same requirement on agencies that provide them with staff?
We agree with the proposed addition of a passage clarifying the worker’s right to make a protected disclosure in their employment contract. However we do not believe that firms, particularly credit unions who would be caught by this requirement, should be required to impose this same requirement on agencies that provide them with staff. Much larger firms may have the ability to impose requirements on agencies however smaller firms do not have the same leverage over agencies nor the resources to ensure that these requirements are adhered to. This would in effect reduce the pool of agencies available to credit unions.
Q6: Do you agree with the FCA’s proposed treatment of whistleblowing arrangements for staff of appointed representatives and agents?
Credit unions do not typically work with appointed representative and therefore we have no comment on this question.
Q7: Do you agree with these proposals for the role of whistleblowers’ champion?
We can see how a whistleblowers’ champion would be useful in larger firms and appreciate the flexibility around the practical detail of this role. However, the expectation of the regulators for a whistleblowers’ champion to have access to resources such as independent legal advice would be disproportionately burdensome for smaller firms, including credit unions above the £25 million threshold. There must be flexibility and proportionality in requirements for resource provided to whistleblowers’ champions so that small firms can provide a resource appropriate to their circumstances and commensurate with their scale.
Q8: Do you agree that the whistleblowers’ champion should prepare an annual report to the firm’s senior governance committee, which is available to regulators on request, but not made public?
We agree in principal with the proposals that the whistleblowers’ champion should submit an annual report to the board. The vast majority of credit unions would have no whistleblowing cases to report therefore would not be particularly affected by this proposal. There should be full flexibility in the format and detail contained in the report in order to allow smaller firms to apply the requirement proportionately.
Q9 Do you agree with our proposed treatment of the role of the whistleblowers’ champion in financial groups?
No response. Not applicable to credit unions.
Q10: Do you agree the FCA should require firms to inform it of cases where an employment tribunal finds in favour of a whistleblower?
We agree with this proposal.
Q11: Do you agree that the FCA and the PRA should not place a requirement on employees to speak up when they see wrongdoing?
We agree with the rationale that the FCA and PRA give for not pursuing this requirement. We do not feel that individuals should be obliged by law or regulation to blow the whistle on wrong doing. This has the potential to place unnecessary pressure on staff to cover themselves with reports of little value or regulatory significance. Such an obligation on junior staff would be difficult to enforce and would diffuse regulatory focus away from senior management who ought to have ultimate responsibility for firm practice as per the Senior Managers Regime.
Q12: Do you have any other comments on the proposals in this consultation paper?
We have no other comments.
Q13: Do you have any comments on the FCA’s cost benefit analysis?
We appreciate that the regulators have taken small credit unions under £25 million in assets into account in applying a threshold to the requirements. Complying with the requirements for these credit unions would be disproportionately expensive since they generally have few staff and we are grateful that this is acknowledged by the regulators.
We would appreciate clear direction from the regulators as to the level of the relevant threshold in light of the fact that, subsequent to the initial consultation, the Senior Managers’ Regime from which the £25 million threshold is derived has been amended.
The full document is available to download on the right hand side.