Individual accountability: holy grail or poisoned chalice?

Abstract

ABSTRACT New legal regimes in various jurisdictions have increased the accountability of senior individuals in financial services to attempt to prevent wrongdoing. This article critically evaluates these efforts using insights from the behavioural sciences research on accountability, the regulatory theory on enforcement, and the criminological literature on compliance. This inquiry is pursued through an analysis of the Senior Managers and Certification Regime (SMCR) and the Banking Executive Accountability Regime (BEAR) in the UK and Australia respectively. These individual accountability regimes (IARs) are designed to make it easier to identify which senior individual is responsible for failing to address wrongdoing within their area of activity. Though often championed for ratcheting up accountability to tackle perceived impunity for wrongdoing, this article explores the limits of IARs. While acknowledging their strengths and merits, it troubles the expectations that such regimes are necessarily effective ways of priming certain anticipated behaviours and increasing cognitive load to slow decision-making processes. It considers the extent to which these regimes may be ineffective given what is known about the miserly nature of human cognition, the tendency to circumvent efforts to encourage ‘right’ decisions, and the inability of individual accountability regimes to address broader structural issues in financial markets.