Something to Bank on: FCA and PRA plan to extend tough regime for bankers to other financial services firms

The extension of the Senior Managers and Certification Regime marks a significant shift in governance requirements for the industry

Today the FCA and PRA announced consultations on the extension of the Senior Managers and Certification Regime (SM&CR), which governs the personal accountability of executives, to almost all financial services firms.

 

Michael Thomas, partner in Hogan Lovells Financial Institutions Sector said:

 

"The impact of the extension of the rules is significant as it dramatically increases the amount of firms which will now be required to comply with the regime.  Implementation of the new requirements is likely to be both costly and time consuming, and smaller firms will potentially be the hardest hit by their new compliance obligations.

 

"However the benefit of this extension is that all UK firms will be governed by a common framework. This may reduce inconsistencies and confusion over the long term."

 

The SM&CR was created after the 2007-8 global financial crisis to impose tougher requirements on senior managers and employees in banks, building societies and very large investment firms.  The FCA is consulting on extending the SM&CR to thousands of investment firms, consumer credit firms and insurers.  The changes increase the scope of SM&CR from approximately 935 regulated investment firms to cover over 60,000 firms.

 

Key areas of SM&CR include:  

 

  • rules requiring regulatory pre-approval of senior managers;
  • a duty of responsibility with which senior managers must comply;
  • certifications that key persons are fit and proper to hold their positions; and
  • conduct rules for most staff working in financial services firms.


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