The Financial Conduct Authority and Prudential Regulation Authority have set out the first stage of reforms to the Senior Managers and Certification Regime, with firms promised lower compliance costs and greater flexibility while the core principle of senior accountability remains in place.
The package is intended to make the regime easier to operate for regulated firms, including lenders and other financial services businesses active in the property market, by relaxing some reporting deadlines, reducing duplication and narrowing the number of firms caught by enhanced requirements.
Among the changes announced on Tuesday are longer deadlines for submitting senior manager applications where there has been an unexpected or temporary change, and more time for firms to notify regulators about updates to senior manager responsibilities.
The regulators also said they will remove the need to certify individuals for multiple overlapping functions, a move they estimate will reduce the total number of certification roles by about 15%.
Annual checks used to confirm that certified staff are fit and proper will also be streamlined, while criminal record checks for senior manager applications will remain valid for longer before an application is submitted.
In another change, thresholds for enhanced firms will rise by 30%, meaning only larger and more complex businesses will have to meet the tougher standards attached to that category.
The FCA and PRA also said the reforms should make certain senior management roles clearer to understand and will give firms more time to update the directory of certified staff.
The announcement forms part of what the regulators described as the first phase of a wider programme of reform involving both regulators and the government.
Alongside the regulators’ measures, the government has published its response to last year’s consultation on the regime. Its proposals include removing the Certification Regime from legislation and giving regulators greater flexibility to reduce the number of senior management functions that require pre-approval.
The FCA and PRA said they plan to consult later this year on broader changes if legislation gives them greater freedom to do so, as part of the Leeds reforms aimed at halving the regime’s regulatory burden on firms.
Sarah Pritchard, deputy chief executive at the FCA, said: “These joint reforms will keep consumers and markets protected while making the regime more proportionate. We’ve also used our current powers to streamline the regime now, so firms can benefit before future legislation unlocks even more efficiencies”.
David Bailey, executive director for prudential policy at the PRA, added: “The SM&CR plays an important role in ensuring accountability in the provision of financial services, but it is right that we work to ensure it is well-targeted and efficient.
“Today’s reforms are an important first step in allowing firms to focus on what matters most, and we will continue to deliver further improvements to the regime as part of the wider reforms being made by the government.”
