LONDON (Reuters) - Smaller banks would be disproportionately hit by new UK rules aimed at toughening the regulatory regime for senior bankers, two of the industry's main lobby groups have warned.
UK regulators should also set different rules for non-executive directors than for executives to ensure they remain independent, the groups said.
The comments were made in response to proposals by UK regulators to make sweeping changes to the way senior bank bosses are regulated, aiming to make executives more accountable and including the threat of prison terms.
The joint response by the British Bankers' Association (BBA) and the Association for Financial Markets in Europe (AFME), seen by Reuters, said they were concerned supervisors expect the same of senior managers regardless of the nature, scale and complexity of the institution.
"The incremental compliance costs for small banks will be a much higher percentage of total revenue than for larger ones ... these new disproportionate overheads will act as a further barrier to small banks, which have fewer senior executives amongst which responsibilities can be shared," the BBA/AFME paper said.
They said guidance could also be issued for non-executive directors (NEDs) that set a more limited and different set of responsibilities.
"The risk of imposing similar requirements on NEDs as on executive directors is that they will effectively embed themselves in the firm, losing their independence," the paper said.
Britain plans to introduce a new senior managers regime (SMR) to make bosses more accountable and a certification regime requiring lenders to assess the fitness of a bigger group of employees who could pose a risk to health of the firm.
(Reporting by Steve Slater; editing by Susan Thomas)