What advice do banking leaders have on SMCR compliance?

Feb 22nd '19

This month, the FCA released a new video where banking leaders share their experiences of adopting the Senior Managers and Certification Regime (SMCR).


How have they found the process of compliance, and what can we learn from their experience?


What is the SMCR?

The Senior Managers and Certification Regime came into force in March 2016. You can read more about the Regime and what it means for firms in our blog looking at how firms could prepare for the new requirements.


In July 2017, the regulator announced plans to extend it to almost all regulated firms.


The Regime aims to ‘reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence’.


Two key ways it hopes to achieve this are by:


  • encouraging a culture of staff at all levels taking personal responsibility for their actions.
  • making sure firms and staff clearly understand and can demonstrate where responsibility lies.


On 9 December 2019, as part of the FCA’s ongoing push towards greater accountability, the regime comes into force for solo-regulated firms, with rules on prescribed responsibility for managers coming into effect at the same time.


How have banks found adopting the regime?

In the FCA’s new video, senior banking leaders, including Jayne-Anne Gadhia (Virgin Money), Liz Nolan (State Street), Vis Raghavan (J.P. Morgan) and Jon Symonds (HSBC), talk about their experiences of applying the SMCR to their organisations.


They also offer advice to the firms that will be adopting the SMCR in 2019.


We summarise some key takeaways from the video below.


  • The regime has brought greater clarity

The participants agree that the regime has increased clarity around roles and accountability. Jon Symonds of HSBC describes it as a ‘clear framework’, while Liz Nolan of State Street praises its ‘transparency, clarity and support’.


  • It reinforces best practice

Rather than moving firms in a new direction, or creating new hoops to jump through, as many firms feared, the regime – in the words of Dame Jayne-Anne Gadhia, former CEO of Virgin Money – instead ‘codifies and professionalises’ what firms are already, largely, doing. Vis Raghavan of JP Morgan agrees, saying that the SMCR is ‘reinforcing the culture, the conduct…the how we do business principles’.


  • The SMCR creates openness and honesty

The need for escalation processes set out in the SMCR can help create an open ethos – as Vis Raghavan puts it a ‘culture of escalate, feel free to speak up’.


The focus on escalation in the Regime can help to ensure that a culture of transparency is embedded in firms’ DNA.


  • It enforces good record-keeping

The FCA demands compliant audit trails in many areas (the approval of financial promotions, for instance). The SMCR helps to reinforce this need for robust record-keeping, by encouraging firms to document decision-making processes and accountabilities. This makes it easier to track and enforce accountability  for delivering on firms’ objectives.


Advice to firms facing SMRC compliance

The leaders in the video share their advice for firms introducing the regime.


This includes:


  • Don’t be scared. The SMCR should benefit firms, rather than simply provide an easier way for the regulator to seek out bad behaviour. It aims to formalise and clarify the way firms should already be operating, rather than introducing anything new. As Jayne-Anne Gadhia says, ‘it’s actually to make sure that everybody does understand what’s asked of them…the job that they’re supposed to do and can  deliver on it’.
  • Adopting the regime is a long-term responsibility that takes a lot of planning – Vis Raghavan describes it as ‘a journey’. Firms wanting to prepare for the requirements need to understand its demands if they want to be ready for compliance. If you’re among the firms still to fall under the regime, you can find out what you need to do to prepare.
  • Don’t leave compliance to the Compliance team. Both Vis Raghavan and Liz Nolan stress that this is something that needs to be owned by the whole business. It needs to be embraced and driven from a business perspective, with Compliance providing expert guidance. But the idea that the SMCR can be pigeonholed as a Compliance initiative will not give you the results you need.


You can watch the FCA’s video here and read the full transcript here.


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