The Review of the Senior Managers and Certification Regime (SM&CR)
The Senior Managers and Certification Regime (SM&CR) is a set of rules that was introduced in 2016 to improve the governance of financial services firms. The SM&CR sets out a framework for holding senior managers personally accountable for their actions and for ensuring that firms have robust systems in place to manage risk.
In December 2022, the government announced that it would be reviewing the SM&CR. The review is being conducted by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
The review is looking at a range of issues, including:
The effectiveness of the SM&CR in improving governance and accountability in financial services firms.
The impact of the SM&CR on competition in the financial services sector.
The cost of compliance with the SM&CR.
The review is expected to be completed in 2023. The government will then decide whether to make any changes to the SM&CR.
What is the SM&CR?
The SM&CR is a set of rules that was introduced in 2016 to improve the governance of financial services firms. The SM&CR sets out a framework for holding senior managers personally accountable for their actions and for ensuring that firms have robust systems in place to manage risk.
The SM&CR applies to all financial services firms that are regulated by the FCA or the PRA. The regime covers a wide range of firms, including banks, insurers, investment firms, and asset managers.
How does the SM&CR work?
The SM&CR works by identifying the senior managers who have the most significant influence over the management of a firm's business. These senior managers are then subject to a number of requirements, including:
They must be approved by the FCA or the PRA.
They must have a clear understanding of their responsibilities.
They must be held accountable for their actions.
They must have access to appropriate training and resources.
The SM&CR also requires firms to have robust systems in place to manage risk. These systems must be designed to identify and mitigate risks to the firm's financial soundness and to the interests of its customers.
What is the purpose of the SM&CR?
The SM&CR was introduced to improve the governance of financial services firms. The regime is designed to do this by:
Holding senior managers personally accountable for their actions.
Ensuring that firms have robust systems in place to manage risk.
Improving the transparency of financial services firms.
Protecting the interests of customers.
What is the impact of the SM&CR?
The SM&CR has had a significant impact on the governance of financial services firms. The regime has made it more difficult for senior managers to avoid responsibility for their actions. It has also made it more difficult for firms to hide risks from regulators and customers.
The SM&CR has also had a positive impact on competition in the financial services sector. The regime has made it more difficult for large firms to dominate the market. It has also made it easier for new firms to enter the market.
The SM&CR has also had an impact on the cost of compliance for financial services firms. The regime has increased the amount of time and money that firms need to spend on compliance. However, the cost of compliance is likely to be outweighed by the benefits of the regime, such as improved governance and reduced risk.
What is the future of the SM&CR?
The government is currently reviewing the SM&CR. The review is looking at a range of issues, including the effectiveness of the SM&CR, the impact of the SM&CR on competition, and the cost of compliance.
The government is expected to publish the results of the review in 2023. The government will then decide whether to make any changes to the SM&CR.
