On 5 August 2019, the FCA published a new webpage containing the findings of its review into the embedding of the Senior Managers and Certification Regime (SM&CR) in the banking sector.

Generally, the FCA found that the banking industry had made a concerted effort to implement the SM&CR finding that most firms have taken actions to move away from basic rules-based compliance towards embedding the regime in the organisation.

Points of interest include the following:

  • senior manager accountability. The FCA states that the SM&CR does not seek to redefine the roles of non-executives. In particular, it does not expect non-executives to act more like executive directors. Indeed, the FCA sees the oversight role of non-executive directors and their ability to challenge management as a key safeguard for the interests of firms’ stakeholders;
  • The FCA states that it found that firms have implemented processes to oversee the certification population. They have taken steps to ensure their frameworks are robust with several checks and balances in place to support the competence assessment and provision of training. However, the regulator also found that most firms could not demonstrate the effectiveness of their assessment approach, use of subjective judgement or how they ensure consistency across the population;
  • regulatory references. Overall the FCA found that firms were positive about the concept of regulatory references in order to prevent individuals with poor conduct records transferring to new employers. However, the industry as a whole needs to be more consistent with the quality, timeliness and reliance on these references;
  • conduct rules. Firms have told the FCA that the SM&CR is having an impact on the mindset of senior managers. However, the SM&CR is primarily enabling firms to improve their controls environment, which they expect to lead to improved behaviours. It is not clear to what extent the regime has been linked to culture; and
  • The FCA notes that some firms seem to have been less successful in embedding the regime below the senior manager level. There is some room for further progress at the certification level and potentially more significant weaknesses in the implementation of the conduct rules for other staff.

The findings of the review will be of interest to the banking sector and to all SM&CR firms, including solo-regulated firms that will be coming into the regime in December 2019 and insurers, for which the regime commenced in December 2018.

The FCA notes that this is not a full post-implementation review and it does not propose to make any policy changes based on it. However, the findings will be used to help focus on communications and supervision.

We have created an SM&CR toolkit which gives firms access to a range of key documents that are needed in order to implement the SM&CR in their business. It includes:

  • a project plan, which maps progress against deadlines;
  • a template management responsibilities map;
  • tools to map senior managers to their new functions;
  • tools to identify certified staff and map/identify the prescribed responsibilities and overall responsibilities across the business to their senior manager function holders;
  • template statement of responsibilities and drafting guides;
  • employment law-related documentation including clause banks to amend employment contracts;
  • a confidentiality and non-disclosure agreement for senior managers; and
  • an outline of the impact of the regime on the employee lifecycle.

Further information can be found here.