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FSA approach to risk management and the role of Compliance
Key findings - systems and controls
No specific systems and controls regarding LIBOR submissions
process in place at relevant time.
Particularly:
no policy in place giving guidance on the importance of the
integrity of the process for determining LIBOR;
no training to submitters about submissions process;
no formal monitoring of submissions made;
no review of integrity of submissions process;
no identification of LIBOR submissions as an area of
significant risk; and
no clear lines of responsibility for systems and controls.
Also once policy put in place:
no setting out or reference to relevant BBA guidelines;
no requirement for records to be kept;
no guidance regarding internal or external communications
regarding LIBOR; and
no guidance regarding conduct that would be inappropriate.
Key findings - actions Compliance
No action following senior manager having flagged potential
conflict of interest between derivatives traders and LIBOR
submitters;
Compliance concluded that no risk of submitters becoming aware
of bank's exposure to LIBOR;
Compliance considered whether any information barriers were
required between submitters and other areas of bank and decided
not;
Compliance did not ask questions of submitters or the manager
who had flagged the potential conflict issue;
Concerns raised with Compliance regarding instruction given by
senior management (following misunderstanding stemming from
"Bank of England call") to reduce LIBOR submissions.
Compliance responded indicating not appropriate but did not speak
with submitters to ensure that instruction not followed or discuss
with senior management;
Compliance did not, in the course of contacting the FSA, convey
submitters' concerns or fully explain Barclay's approach to
submissions; and
Compliance did not inform the FSA of the senior management
instruction to reduce LIBOR submissions until a later date.
Key questions for Risk/Compliance following notice
Have all potential conflicts of interest arising out of
activities been identified?
Where there are potential conflicts, have appropriate systems
and controls been put in place to manage risk?
In relation to systems & controls:
- is there a clear policy?
- does the policy appropriately reference regulatory/other
guidance?
- has there been appropriate training on the policy?
- are outcomes/actions appropriately monitored to ensure
compliance?
- are appropriate records kept?
- is there clear guidance as to what is/not appropriate?
Are there clear lines of responsibility for the effectiveness
of systems and controls?
Have Compliance fully investigated and taken appropriate action
in relation to all potential conflicts/other concerns raised with
them?
Should decisions/conclusions reached by Compliance on issues be
reviewed?
Are all necessary internal information barriers in place?
When conflicts/concerns have been raised have all appropriate
lines of investigation been followed?
Where Compliance has given instructions/a clear view, have
checks been made to ensure followed?
Has Compliance been fully open when reporting matters
to/dealing with queries from regulatory bodies?
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