10 October 2016

Whistleblowing in UK branches of overseas banks – the duty to inform

This article was written by Sarah Howard, Associate

We have previously reported on the new Financial Conduct Authority (“FCA”) and Prudential Regulation Authority (“PRA”) whistleblowing rules for UK banks and insurers. These came fully into force in September 2016.  In summary, these rules aim to encourage individuals to raise concerns and challenge poor practice in these sectors without fear of retaliation, and include an obligation for firms to appoint a senior individual as a “whistleblowing champion”.

When these rules were finalised in October 2015, the regulators indicated that they would in future consult on applying them to UK branches of relevant overseas firms. The FCA and the PRA have now set out their proposals in relation to whistleblowing in UK branches.

What are the proposals for affected branches?

In February 2015, the regulators had sought views on requiring UK branches of relevant overseas firms to put in place internal whistleblowing arrangements and to appoint a whistleblowing champion, in order to ensure that the aims of transparency and accountability were pursued consistently throughout all relevant businesses operating in the UK.

However, respondents to that earlier consultation indicated various legal obstacles to implementation of the full rules, including the impact of non-UK legal regimes which could apply to a UK branch of an overseas firm in parallel to the UK requirements. For example, what constitutes protected whistleblowing in the UK could be a criminal offence in another country, making a potential whistleblower subject to irreconcilable regulatory requirements. As a result of these legal obstacles, the regulators now propose a much more limited set of obligations, as follows:

  • UK branches of overseas banks and insurers must tell their UK-based employees about the FCA and PRA whistleblowing hotline services in the UK; and

  • where a branch of an overseas bank sits alongside a UK-incorporated bank that is subject to the UK whistleblowing rules, staff must be informed of the subsidiary’s whistleblowing arrangements.

Although UK branches of relevant overseas firms are not required to implement the full UK whistleblowing rules, the regulators do indicate that the rules are good practice guidance for such firms, so some may still consider it appropriate to implement their own whistleblowing arrangements.

What does this mean for international banks with a branch in the UK?

The proposals are not yet in force, as they remain at the consultation stage. Comments on the proposals have been requested by January 2017; the PRA has indicated that it expects its final rules to come into force in September 2017, and we would expect the FCA to follow the same timescale.

If the proposals remain in their current form, the compulsory information obligation should not be onerous to implement. Firms planning to implement the full rules as a matter of good practice should commence preparations now, however. We will keep you posted on any updates.

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