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In 2008 the now defunct Financial Services Authority (FSA) set out a series of recommendations for firms to help protect themselves against "rogue" traders and other fraudulent activity.
These included requiring traders and their supervisors to take two weeks' consecutive leave each year.
The other recommendation on holidays was for traders to take "desk holidays", where they take a break from marking or valuing their own books and a colleague takes over this responsibility.
The thinking behind these two week rules was that this length of time would allow other staff to check the trading books and spot any anomalies in the trading position. The FSA's recommendations were in response to the activities of rogue trader Jerome Kerviel, at Societe Generale, who hid unauthorised bets of up to 50 million euros.
In his interviews to the police, he commented that the fact that he had not taken a single day's holiday during 2007 should have alerted management, and that this is one of the primary rules for internal control.
The FSA stopped short of introducing an outright requirement for banks to do this. It is understood that it preferred a "principles-based" approach that requires senior management to be alive to the issues and to comply with what is seen as best practice.
Many used to dealing with Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) regulation will be familiar with this approach.
It should also be noted that the two week holiday rule has been widely recognised both in Europe and the US as the European Banking Authority and the Securities and Exchange Commission respectively endorse this approach.
In short, yes, if the requirement to do so is a term in the employment contract. Although the Working Time Regulations 1998 give an entitlement to annual leave, there is no requirement for the individual to take any specific amount of leave at any particular time, unless the employer gives notice to the individual to take leave on particular days.
In this instance, however, the employer is not requiring that the employee must take this amount of holiday at any particular time, but that two consecutive weeks holiday must be taken at some point during the holiday year.
It is unlikely that banks are going to want to designate a specific two week holiday period.
In order to give the employer the power to enforce leave if the employee does not take it, it is therefore important for employers to ensure the two week requirement is contained in the employment contract rather than being part of a policy or a recommendation.
If this is not already contained in employment contracts, banks should consider taking advice on amending the contracts to include this provision and consider which employees should be covered. This also has the advantage from a compliance point of view of demonstrating that the bank has taken appropriate steps to minimise risk.
Another factor to consider in these days of increased remote access via laptops and blackberries is that the requirement to take leave should also carry with it an instruction to traders not to access their books remotely or at least to refrain from doing so.
Although this may be more difficult to police and enforce, any evidence that significant remote activity is being undertaken (which would presumably be picked up by the employee covering the trader's holiday) may also give cause for concern and be investigated.
In addition to being a contractual requirement, banks should ensure that they have systems in place to regularly monitor leave taken and check that employees are actually taking the two weeks' consecutive leave so that it is not easy for someone to slip under the radar.
If the checks reveal that an employee isn't taking the required amount of leave, they should be reminded to do so and this should be followed up on. If an employee seems to be unwilling to take leave without good reason, this should ring alarm bells.
Employers should investigate whether this might be to do with unlawful activities the individual might be trying to cover up, or whether there is another issue such as bullying or stress. The reason should be established by managers in conjunction with HR and dealt with appropriately depending on whether it is a disciplinary, capability or grievance issue.
This also has the advantage of flagging up any problems early, whatever these might be, which can then be dealt with before they spiral out of control.
A requirement that traders should take two weeks' holiday is a key security measure and employers should ensure that this is a contractual term which is monitored and adhered to as part of putting in place systems and controls to minimise "rogue" trader risk.
There is, of course, another good reason for ensuring that employees have a proper break from work and that is for the benefit of their health, which is one of the underlying purposes behind the Working Time Directive.
A two-week (proper) holiday from work helps prevent stress and other work-related illnesses and benefits all.
As Kylie Minogue said, "I have had a holiday and I'd like to take it up professionally".
This article was written by Nick Hurley, and published initially on 4 December 2014 in Thomson Reuters Accelus.
For further information please contact Nick on +44 (0)20 7203 5039 or firstname.lastname@example.org.