What is Senior Managers and Certification Regime?

    
This is part 1 of a 3 part series on SMCR. Subscribe to be informed of part 2, 'Extension of Senior Managers and Certification Regime' and part 3, 'Implications of Brexit on Senior Managers and Certification Regime'. We will also be releasing a more in depth white paper on the topic later this week.

What is Senior Managers & Certification Regime?

Senior Managers & Certification Regime (SMCR) is a regulation which was implemented in March 2016 by the UK regulators, The FCA (Financial Conduct Authority) and The PRA (Prudential Regulation Authority). The regime’s aim was to extend regulatory accountability to the senior managers within the top banks of the UK in an effort curb corruption and enforce an increased culture of compliance in the UK financial services market. In particular, it aimed to establish a framework to;

  • “Focus accountability on a narrower number of individuals at the top of the bank
  • Encourage individuals to take greater responsibility for their actions
  • Make it easier for both banks and regulators to hold individuals to account.”

 

A brief history of SMCR

As mentioned previously, SMCR was introduced by the 2 main UK financial regulators the FCA and the PRA. But where did SMCR originate? The aftermath of the 2008 financial crisis and the political and economic climate which followed was largely responsible for The UK governments increased scrutiny of the financial markets, and regulating them. The Senior Managers and Certification Regime is an overhaul of the previous legislation, Approved Persons Regime (APR). This overhaul of legislation was the result of recommendations from the Parliamentary Commission on Banking Standards (PCBS), a government appointed body which was set up to consider and report on the UK banking sector following the financial crisis of 2008. The PCBS released a condemning report where it highlighted the ‘profound lapse in banking standards’ in particular from senior bankers. A lack of responsibility from these senior managers and criticism of the APR is what led to the introduction of the Senior Managers and Certification Regime. 

Certification Regime

Another part of this legislation is the Certification Regime, commonly tied together with SMR to annotate SM&CR. The certification regime covers those within a firm who give financial advice or have significant influence, but are not necessarily a senior manager. Under the legislation it is the firm’s responsibility to vet these individuals, and consequently the firms are held responsible for their actions. The FCA has a set of guidelines to help the firms with this vetting process. (FCA, 2015).

Conduct Rules

The last part of legislation which makes up SMCR is the ‘Conduct Rules’. These are the rules associated with the legislation, which are to be adhered to. Any individuals which fall within SMCR need to ensure that they are compliant of these set of rules. (FCA, 2015)

This is an excerpt from a whitepaper. You can download your free copy of the full whitepaper here: "Senior Managers and Certification Regime - How to Prepare Your Organisation"

 

Sources: Allen&Overy DeloitteMayer Brown