Senior Managers and Certification Regime

NEWS
Published
Mar 30th '23
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The Senior Managers and Certification Regime (SM&CR) aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence. See how it applies to your firm.

 

Launched in 2016, the SM&CR initially applied to banks, building societies, credit unions and Prudential Regulation Authority (PRA)-designated investment firms. Insurers were brought fully into the regime in December 2018, and a year later it was extended to cover all solo-regulated firms except benchmark administrators, which were included in December 2020.

 

Following the announcement from HM Treasury in December 2022 on the Senior Managers & Certification Regime, in 2023 the government has launched a call for evidence on the regime, and the Financial Conduct Authority (FCA) and PRA are conducting their own reviews as well.

 

The SM&CR aims to reduce harm to consumers and strengthen market integrity by creating a system that enables firms and regulators to hold people to account. As part of this, the SM&CR aims to:

 

  • encourage staff to take personal responsibility for their actions
  • improve conduct at all levels
  • make sure firms and staff clearly understand and can show who does what

 

The introduction of the SM&CR didn’t require firms to change their governance structure or hire new people to fill specific roles.

 

The regime consists of three parts: the Senior Managers Regime, the Certification Regime, and the Conduct Rules.

 

Background

In response to the 2008 banking crisis and significant conduct failings such as the manipulation of LIBOR, Parliament set up the Parliamentary Commission for Banking Standards (PCBS) to recommend ways to improve standards in the banking sector.

 

PCBS recommended a new accountability framework focused on senior management. It also recommended that firms take more responsibility for employees being fit and proper, and that there be better standards of conduct at all levels in banking firms.

 

Based on these recommendations, Parliament passed legislation in December 2013, leading to the FCA and PRA applying the SM&CR to the banking sector from March 2016, following detailed consultation. Parliament made further changes to legislation in May 2016, requiring them to extend the regime to all FSMA-authorised firms.

 

SM&CR Banking Stocktake Report

In 2019 the FCA undertook a review to understand how the SM&CR had embedded in the banking sector in the 3 years since it was introduced. The review indicated that firms’ senior managers had become clear on what accountability meant for them and that the SM&CR had often led to stronger tone and ownership by senior management, with many firms seeking to develop a culture of challenge, escalation and safety to speak up.

 

Additionally, in 2020 the PRA published an evaluation of how the SM&CR was delivering against its original objectives in the context of dual-regulated firms.

 

Source: FCA

 

First published:  Last updated: 30/03/2023

 

Page updates

30/03/2023: Editorial amendment content review
13/03/2023: Editorial amendment website refresh menu update
06/02/2023: Editorial amendment page update as part of website refresh
22/09/2022: Information changed Previous coronavirus (Covid-19) governance arrangements
12/01/2021: Editorial amendment Coronavirus information moved from the main firms coronavirus page,
08/01/2021: Information added Publication of directory persons data update.
16/12/2020: Information added PRA SM&CR evaluation report
09/12/2020: Editorial amendment House style updates