Hiring NEDs for Financial Services Boards

By Adrian Lawrence FCA, founder of NED Capital · Part of the Board Governance Hub

Financial services boards operate under a level of regulatory scrutiny and personal accountability that sets them apart, and hiring non-executive directors for them is correspondingly distinctive. A bank, insurer, asset manager or other regulated financial firm needs independent directors who bring the usual governance qualities and, on top of them, genuine regulatory credibility, the specific expertise their committees demand, and a readiness to carry the personal accountability the Senior Managers regime imposes. The pool of candidates who combine all of this is narrower than the general non-executive market, and the appointment process carries requirements an ordinary board hire does not. This guide sets out how to hire non-executive directors for financial services boards: what the regulatory framework demands, what expertise these boards need, and how the appointment differs from a standard one.

It is written for financial services firms, their boards and nomination committees, and draws on NED Capital’s specialist work on regulated board appointments. Every search is led personally by Adrian Lawrence FCA.

Why Financial Services Boards Are Different

Governing a financial services firm carries responsibilities most boards never face. The firm operates under intensive regulation by the Financial Conduct Authority and, for banks, insurers and larger investment firms, the Prudential Regulation Authority, whose expectations of board composition, competence and conduct are high and actively enforced. Board members holding designated senior functions are personally accountable under the Senior Managers and Certification Regime. The subject matter — capital, liquidity, conduct, financial crime, operational resilience — is technical and consequential, and the cost of governance failure, for the firm and sometimes the wider system, is severe. Financial services boards therefore need non-executive directors who genuinely understand this environment, not directors who bring general governance experience and hope to learn the regulatory dimension on the job. This is the central fact that shapes hiring for these boards, and it is why a specialist approach matters. Our financial services NED recruitment and FCA-regulated board governance practices focus specifically here.

The SMCR and Senior Management Functions

The defining feature of financial services board appointments is the Senior Managers and Certification Regime. Under it, key board roles are designated Senior Management Functions requiring pre-approval by the regulator: the chair (SMF9), the chairs of the risk and audit committees (SMF10 and SMF11), the senior independent director (SMF14) and others depending on the firm. A candidate for such a role must be assessed and approved by the regulator for fitness and propriety before taking it up, and then holds direct, personal accountability for their area of responsibility, with real consequences if things go wrong. This transforms hiring: the board must be satisfied with a candidate, and so must the regulator, and the candidate must be willing and able to shoulder the accountability the regime brings. Our pages on the SMF9 chair, the SMF10/SMF11 risk and audit committee chair and the SMF14 senior independent director cover the specific functions.

The Expertise These Boards Need

Financial services boards need particular expertise across their non-executive complement. Financial and accounting expertise of a high order, especially for the audit committee, where the technical demands of financial-services reporting and controls are considerable. Risk expertise for the risk committee, covering the credit, market, liquidity, conduct and operational risks the firm runs. Regulatory knowledge — a genuine understanding of the regime, the firm’s obligations, and the expectations of its regulators. And increasingly, specific expertise in areas of growing regulatory focus: financial crime and anti-money-laundering, operational and cyber resilience, and conduct and consumer outcomes. A financial services board must collectively cover these, which means hiring is often driven by the specific gap the board needs to fill — a risk specialist, an audit chair with banking experience, a director with conduct or financial-crime expertise. Identifying the precise gap and hiring against it is central to strengthening these boards.

Finding and Assessing the Right Candidates

The candidate pool for financial services boards is specialised, because it requires board capability combined with genuine regulatory credibility and, often, specific sub-sector experience. The strongest candidates typically bring prior experience of regulated financial firms, a working command of the SMCR and the relevant framework, the specific expertise the role requires, and frequently prior experience of holding a senior function. Assessing them means testing regulatory understanding and credibility alongside the usual governance qualities, and being confident they can satisfy the regulator’s fitness and propriety assessment — a strong general director who lacks genuine regulatory grounding will struggle through approval, however impressive their broader record. This is specialised hiring, and it calls for a search partner who understands both the regime and the market of regulated-firm directors, and who can identify candidates with the specific combination of board capability, regulatory credibility and sub-sector expertise a given role needs. A general board search risks producing candidates who cannot satisfy the regulatory dimension.

How the Appointment Process Differs

Hiring for a financial services board differs from an ordinary board appointment at almost every stage. The specification must account for the regulatory function and the specific expertise it requires. The search must reach a narrower, specialised pool. The assessment must weigh regulatory credibility as heavily as governance capability. The appointment requires regulatory approval, which the board does not control and which takes time — weeks or months — and must be built into the plan, particularly where a required function would otherwise sit vacant, itself a regulatory concern. And the successful candidate takes on personal accountability an ordinary non-executive does not. The disciplines of good appointment still apply, but they operate within a regulatory framework that shapes every step. Understanding and planning for that framework — rather than treating the regulatory dimension as an afterthought — is what distinguishes a well-run financial services board appointment. Our guide to appointing a NED for an FCA-regulated firm covers the process in detail.

Frequently Asked Questions

What is different about hiring NEDs for financial services boards?

These boards operate under intensive regulation and personal accountability. Directors need genuine regulatory credibility and specific expertise on top of general governance ability, key roles require regulatory pre-approval, and the candidate pool is narrower and more specialised than the general NED market.

Which financial services board roles require regulatory approval?

Under the SMCR, designated Senior Management Functions including the chair (SMF9), the risk and audit committee chairs (SMF10 and SMF11) and the senior independent director (SMF14), among others. Candidates must be approved by the regulator for fitness and propriety before taking up these roles.

What expertise do financial services boards need?

High-order financial and accounting expertise, especially for audit; risk expertise for the risk committee; genuine regulatory knowledge; and increasingly specific expertise in financial crime, operational and cyber resilience, and conduct. Hiring is often driven by the specific gap the board needs to fill.

How long does a regulated board appointment take?

Longer than an ordinary one, because it requires regulatory approval — often weeks or months. This must be built into the timeline, particularly where a required function would otherwise be left vacant, which is itself a regulatory issue.

Can a director without financial services experience join a regulated board?

It is difficult for the regulated senior functions, where the regulator assesses competence for the specific role and genuine regulatory credibility is expected. A strong general director who lacks regulatory grounding will struggle through the approval process, so relevant experience is usually essential.

Why use a specialist search for financial services board hires?

Because the pool is narrow and the requirements specific — board capability plus regulatory credibility plus sub-sector expertise — and both the board and the regulator must be satisfied. A search partner who understands the regime and the regulated-director market is far better placed to identify candidates who fit and can be approved.

NED Capital | Sister practice of FD Capital | ICAEW practising certificate held by Adrian Lawrence FCA.