By Daniel Hunter

The financial services industry is being consulted on a range of voluntary standards, derived from best practice in the industry, which will raise the quality of corporate governance in the industry, specifically of its boardroom leadership.

It is part of a wider programme called Leadership 21st Century, which is being developed with employers by the Financial Skills Partnership (FSP), the skills champion for the sector, with the primary aim to help the financial services sector restore its global reputation and rebuild consumer confidence.

It focuses specifically on the effectiveness of boards and governance of firms, with an emphasis on skills, as this is key to improving outcomes for financial services consumers.

“This is a wide-ranging initiative that intends to provide direction and guidance, tools and solutions which will help firms to improve the quality and effectiveness of corporate leadership and board performance in our sector," Liz Field, the FSP’s CEO, said.

"This is essential if consumers are to regain their confidence in the sector and the products and services it provides.”

At the core of the initiative are a set of draft voluntary standards for good board practice which have been developed with support from the major trade bodies, the Association of British Insurers, the British Bankers’ Association, the regulators, the Financial Services Authority (FSA) and Financial Reporting Council (FRC), major employers, professional services firms, and public service bodies.

“The first step has been to produce the draft standards, and the consultation is the industry’s opportunity to input to the standards and help shape the final outcome, so that it is representative of the views of the sector as a whole," Liz explained.

"There are already a range of very specific requirements for boards to comply with, including the FRC’s Corporate Governance Code and the FSA Handbook rules. These draft standards do not impose additional requirements for boards. They are designed to help firms see clearly what a good standard of application would look like in each area of responsibility.

“The final standards can be used as a framework within the annual review and evaluation of board effectiveness undertaken by FTSE 350 firms. Once these standards have been finalised, the FSP will also develop a simple but robust measurement and reporting system. A number of options are under consideration but we need further discussion with firms on how this might be best achieved, and to this end we will be running a series of focus groups hosted by supporters of this project during the consultation period."

The programme could not have come at a more appropriate time. The industry’s statutory and regulatory landscapes are both about to be significantly changed. The Financial Services Authority ceases to exist on 1st April and will be replaced by the new Prudential Regulation Authority and the Financial Conduct Authority (FCA).

The new FCA will have greater powers, and its core focus will be on good conduct and on putting customers at the heart of all business. Additionally, the Banking Reform Bill is due to be voted in later this year, after the recommendations of the Parliamentary Commission on Banking Standards have been taken into account.

Putting the initiative into context, Liz said, “The industry currently has a window of opportunity in which to agree and establish its own leadership standards and potentially avoid external prescription. It is just such industry-led change that we at the FSP are supporting through the development of Leadership 21C. The voluntary standards which are now open to consultation are based on the level currently attained by the best, and the aim is for all boards to operate at this higher level.

“Currently the FSP is calling for industry-wide consultation on its draft standards. We want to ensure that they are representative of the views of the sector as a whole. The consultation period is open for 10 weeks until 9th April 2013. For a company to give its input to the draft standards need not be time-consuming - all the details can be found on the FSP’s website. We are urging companies, both large and small, across the whole of the financial services sector, to have their say.”

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