Global Regulation Tomorrow

On 15 July 2025, HM Treasury (HMT), the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) each published consultation papers (CPs) setting out reforms to the Senior Managers and Certification Regime (SM&CR).

In December 2022, the government announced that HMT, the FCA and the PRA would work together to undertake a review of the SM&CR. On 30 March 2023, HMT published a Call for Evidence on the legislative framework of the SM&CR. This publication was accompanied by a joint Discussion Paper by the FCA and the PRA.

HMT consultation

In the HMT CP the government delivers on the Chancellor’s commitment, as part of last year’s Mansion House speech, to consult on removing the Certification Regime from legislation entirely.

In addition, the consultation proposes major changes to the legislation that sets the framework for the Senior Managers Regime. In particular, HMT proposes to reduce the overall number of senior managers within the regime, by providing greater flexibility for the FCA and PRA in specifying the list of Senior Management Functions (SMFs), which require regulatory pre-approval. In addition, HMT proposes to allow firms to appoint certain senior managers without pre-approval by the regulators. This will require a modification to the statutory requirement in the Financial Services and Markets Act 2000 that currently requires firms to ensure that all senior managers are subject to prior approval by a regulator. Changes could be made to enable the FCA and PRA, via rules, to develop different mechanisms to manage senior manager appointments.

HMT also proposes to remove prescriptive legislative requirements relating to the provision, maintenance and updating of Statement of Responsibilities (SoRs), with the aim of allowing the regulators to adopt a more proportionate approach. In addition, HMT is interested in receiving feedback on whether any requirements in legislation for the Conduct Rules create a disproportionate burden. The government is also considering whether additional specific measures are needed to support the movement of international talent into senior manager roles in the UK.

PRA and FCA consultations

In their respective CPs, the PRA and FCA set out initial proposed changes to their SM&CR rules and expectations within the context of the current legislative framework. Both regulators will consider consulting as part of a ‘Phase 2’ of reforms on proposals to take advantage of any additional flexibility arising from HMT’s proposals set out above.

The PRA has published CP18/25 – Review of the SM&CR and sets out proposals that include those relating to:

• The regulatory determination of SMF applications, centring on changes to the ‘12-week rule’.
• Who is within scope of the Senior Managers Regime, including the Group Entity (SMF7) function. The PRA also sets out proposals to exclude appointments in relation to the resolution or stabilisation of a deposit-taker.
• The application and ongoing operation of different components of the SM&CR. This includes clarificatory proposals relating to SoRs, Management Responsibilities Maps, Criminal Record Checks and the Certification Regime, as well as improvements to notification requirements for senior individuals working in insurers, known as Key Function Holders.
• Enhance firms’ ability to navigate the SM&CR including increasing visibility of the inventory of Senior Manager responsibilities and the creation of a specific Policy Index for the SM&CR to be added to the Bank of England’s website.

The PRA also responds to stakeholder responses received on the Conduct Rules, what is meant by ‘reasonable steps’, and regulatory references.

The FCA has published CP25/21: Senior Managers and Certification Regime review and sets out proposals that include those relating to:

• Improving the efficiency of the 12-week rule, which allows someone to cover for a Senior Manager without being approved, under certain conditions.
• Streamlining the SMF approval process, including planning potential changes to processes and communications.
• Increasing the validity period of criminal record checks for SMF applications.
• Allowing more time to report updates to SoRs.
• Removing overlap in certification roles and provide guidance on annual certification to help firms streamline the process.
• Allowing more time for firms to update specified Directory information.
• Providing guidance in areas such as the applicability of key SMF roles; allocation of Prescribed Responsibilities; and application of Conduct Rules and related reporting requirements.
• Changing guidance about the period in which firms should provide regulatory references about individuals upon request from a hiring firm.
• Raising the thresholds for becoming an Enhanced SM&CR firm.
• Making certain technical changes to the Handbook to align with some of the PRA’s proposals.

Next steps

The deadline for comments on each CP is 7 October 2025.

The FCA states that it will review the feedback to CP25/21 and develop final regulatory requirements for publication in a Policy Statement expected in mid-2026.