THEY used to be trophy jobs that seasoned executives fought for. Now, in the aftermath of the financial crisis, finding people prepared to become directors and take on the responsibility of ensuring another bank does not go down is a tough challenge.

It hasn’t helped that the Financial Services Authority (FSA) has given itself a veto on candidates. In a letter to 5,000 chief executives of financial institutions last month, the City watchdog said it expected to be heavily engaged in the recruitment of senior figures, including non-executives, from the shortlist stage onwards. Firms that have already experienced the new regime don’t like it.

“We’ve had clients send in nonexecutives [to the FSA] prior to registration to face a two-hour grilling from a panel of five or more,” said Nadia Swann, a financial regulation partner at Linklaters, the law firm. “For executives and non-executives who want to be board members, this is no fireside chat. It takes the shine off the role and makes candidates, and their selectors, think twice before putting themselves through the process.”

Some recruiters are sceptical about how effective the intervention will be. “If there is a clear, objective reason why the FSA should reject an appointment, that is fine and a very valuable check,” said one senior headhunter, who did not want to be named. “But when it’s a subjective judgment as to whether someone would be a good non-executive for a particular board, I fear that the FSA will struggle to have the skills for that.”

The watchdog, under Hector Sants, the chief executive, already has its hands full. It is imposing stringent new rules about capital adequacy on banks as well as formulating a remuneration regime designed to pin risk to reward. All of this under the watchful eye of George Osborne, the shadow chancellor, who has resolved to hand banking regulation to the Bank of England should the Conservative party come to power next year.

The FSA has always had the ability to reject appointments, but now it wants actively to approve them, and ensure candidates know what they are letting themselves in for. “In assessing competence, we will expect senior management to be able to demonstrate their understanding of the inherent risks in the business/markets and to articulate what plans are in place to mitigate the risk of failure,” the FSA said in the letter to chief executives.

Its campaign to police new postings that carry a “significant influence function” will cover risk directors, chairmen and other senior managers. It is searching for a top banker who will assist the enforcement team and sit in on some of the interviews.

He or she will be kept extremely busy. In the past 12 months, some 18 of the 172 candidates sent to the FSA for approval have withdrawn, in most cases to avoid eventual rejection. One such aborted appointment is believed to have been that of Johnny Cameron, the former head of Royal Bank of Scotland’s investment banking arm, to Greenhill, the boutique investment bank.

Swann at Linklaters likens the FSA’s beefed-up role to the situation in the aftermath of the Barings bank collapse in 1993, when the watchdog introduced rules of engagement for senior management to ensure those at the top understood the business they were running.

“Now, after the credit-crunch disasters, the FSA wants a piece of the selection process, because if the board is found to be wanting, it’s the FSA that is left with egg on its face,” she said.

The senior headhunter said the consequences could be far-reaching. “What happens when, as it will, a board fails? Who takes the responsibility? Will it be the chairman or will the shareholders look to the FSA?”

That is assuming the banks can fill their vacant posts in the first place. Bob Penn, a partner in the regulatory practice team at Allen & Overy, the law firm, believes that the FSA’s new tactics are a turn-off for candidates. “There is little doubt that the FSA’s more aggressive approach to approval of senior managers is starting to act as a deterrent to individuals, particularly non-executives, taking up positions with banks and other regulated institutions,” he said. “There is a sense from some non-executives that the repeated veiled threats of personal liability for senior management have made the financialservices industry simply too risky.”

Some executive recruiters have received the new regime positively. “Overall, I think good people welcome scrutiny,” said Ashley Summerfield, global head of the board consulting practice at Egon Zehnder International.

“We see the same with our management appraisal service for executives. The talented people welcome the fine-tooth comb; the people with lots of question-marks or development needs don’t. It’s also the same with board effectiveness reviews. Confident chairmen and boards welcome objective, external facilitation; less sure-footed ones don’t like to face the music.”

Summerfield suggested that the extra step of gaining the FSA’s blessing could prove to be a useful cooling-off period, giving candidates a final chance to consider whether they are happy to proceed.

“It may try people’s patience a little bit, but it’s no bad thing for candidates to think deeply and deliberately about whether they really want the role.”

He does not expect the FSA’s plans seriously to affect candidates’ enthusiasm, but fears that other trends might, such as the increased time commitment required by the role of director and concern about whether they can truly master the workings of the business, including arcane financial instruments.

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