Senior Managers and Certification Regime: one year on

Mar 7th '17

Today marks one year since the implementation of the Senior Managers and Certification Regime (SMCR), a range of policy changes introduced by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) to increase individual accountability within the banking sector.


In 2013, the Parliamentary Commission on Banking Standards (PCBS) recommended a series of measures to improve standards in financial services. The FCA, in partnership with the PRA, took these measures forward through the Senior Managers Regime, Certification Regime, Conduct Rules, changes to the remuneration code and additional rules on whistleblowing. Many of the rules for deposit takers and the largest investment firms (banks) came into effect on 7 March 2016.


The FCA and PRA also introduced rules for senior managers in insurers which came into effect on 7 March 2016 as well.


The measures play a key role in the FCA’s continued focus on culture and governance in firms, and builds on initiatives to help the FCA identify and assess key senior individuals.


From today, 7 March 2017, the rules regarding regulatory references for Senior Managers and staff in the Certification Regime come into force. The Certification Regime applies to staff in roles that can cause ‘significant harm’ to either the firm or its customers. This includes, for example, investment and mortgage advisers. Today is also the deadline for firms to have issued certificates for staff in the Certification Regime.


The Conduct Rules, which have applied to Senior Managers and staff in the Certification Regime for a year, also apply to all other staff from today, apart from those undertaking purely ancillary functions, such as security staff.


Embedding the regime

The changes have been put in place to ensure that individual responsibility is at the heart of how these firms conduct themselves. One year on, the FCA has seen firms taking their responsibilities more seriously. But we recognise culture change takes time and there is still more to do. So we will continue to keep a watchful eye on the progress that firms are making.


Since the regime was introduced, the FCA have been undertaking work to ensure that senior manager responsibilities are properly allocated and understood in firms. In some cases, they have seen evidence of overlapping or unclear allocation of responsibilities. In other cases, firms appear to be sharing responsibility amongst some staff at different levels of management, obscuring who is genuinely responsible.


However, the FCA have also seen strong progress in relation to firms adopting a culture of individual accountability through their implementation of the regime.


Extending the regime

The Bank of England and Financial Services Act 2016 extends the SMCR to all sectors of the financial services industry. It also allows the FCA to apply all elements of the regime to insurers. The FCA intend that their extended regime will be clear, simple and proportionate. During Q2 of this year they will be consulting widely with industry, firms and consumers on our proposals. The FCA expect implementation to begin from 2018.


Source: FCA


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