FCA: Changes to SM&CR regime aren’t deregulation, they’re better regulation
The FCA is delivering practical improvements to the Senior Managers and Certification Regime will make accountability smarter and simpler, says Sarah Pritchard
Senior accountability is the foundation of building trust and confidence in UK financial services. But leaders being on the hook for their actions doesn’t need to mean they get tangled in red tape.
We know that unnecessary friction can distract from running and growing businesses. That helps no one – not consumers, not firms and not the economy.
That’s why we’ve acted, alongside the PRA, to deliver some practical improvements to the Senior Managers and Certification Regime (SM&CR) – without compromising the principle of accountability. These are changes firms can start benefiting from quickly rather than waiting for bigger changes, which need legislative reform.
Where duplication can be removed and flexibility increased, we are doing it – peeling away processes that add cost but little value.
As a senior leader, I understand the need for flexibility, especially where people are concerned. If the unexpected happens, and a sudden switch of leadership is needed, we’re giving firms more time to apply for changes to get new senior managers approved.
Reducing unnecessary burdens
And we know there must also be trade-offs to help firms focus on what matters and reduce unnecessary burdens. That’s why we’re cutting the need to certify people to hold multiple overlapping functions and changing how they are recorded on the Directory to remove multiple listings – which will reduce the number of roles that need to be certified by around 15 per cent.
We’re also making only larger, more complex firms that have the greatest impact on the market meet our enhanced standards, by raising many of the enhanced firm thresholds by 30 per cent. This is smarter regulation: the highest standards where they matter most and reducing unnecessary burdens elsewhere.
I’m personally accountable for the areas I oversee, so I need confidence that the people working there are competent, honest and doing the right thing. But accountability isn’t strengthened by paperwork for its own sake.
That’s why we’re making annual fit and proper checks more practical by letting firms embed them into annual appraisals, use existing digital records as proof, and focus attention where risks change. This sharpens senior leaders’ oversight and better protects consumers and markets.
Wider government reform which will need parliamentary legislation is expected to bring more flexibility that we can use to improve our rules further. But by acting now, we’re delivering immediate benefits while laying the groundwork for a future regime that is fit for a modern financial services sector.
This is not deregulation. It is better regulation. The UK’s future growth depends on well-run firms operating in well-regulated markets. Smarter, simpler accountability is a critical part of getting there.
Sarah Pritchard is deputy chief executive of the FCA