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Senior Managers Regime Accountability Rules

March 2016 saw the introduction of the Senior Managers Regime (SMR) in Britain. The main purpose of the Regime was to raise the standards of governance in financial markets.

1 YEAR LATER: How is the Senior Managers and Certification Regime working in practice?

The new rules forced banks into stating which officials oversee specific operations.

But, in reality, has it become any easier to sanction those at fault?

The Financial Conduct Authority (FCA) is the regulator for the financial markets. The FCA update came exactly 1 year after introducing SMR.

The industry watchdog produced a damning report. They say British banks are still failing in setting out clear areas of responsibility for top level management. That makes it difficult to pinpoint who to blame when situations deteriorate.

The new rules eased lawmaker concerns following the financial crisis of 2007-09. Far too few individuals were ever punished and British taxpayers had to bail out lenders.

Unclear Allocation of Responsibilities

The first anniversary of the new SMR rules gave the FCA an opportunity to outline any progress made. But instead, they said there was overlapping or unclear allocation of responsibilities.

Some firms appeared to share responsibility with staff at different levels of management. That system obscures who in fact has ultimate responsibility.

Senior Managers Regime 2nd Leg

March 2017 sees the second leg of the regime come into force. Financial industries call it the ‘certification of less senior staff‘.

That will include investment and mortgage advisers. Their mistakes could cause significant harm to their employers and their customers.

Regulator will vet all senior managers before they take up their post. Certification means a potential increase to the number of people facing personal sanctions.

But, in fact the banks apply the certification regime themselves.

A dispute resolution lawyer said: “In time, we may see an increase in enforcement activity. It may extend beyond senior management and lead to those who they delegate. These are the people who they rely from day-to-day. UK banks should be clearer on where the buck stops.”

UK government will roll out the SMR regime across the whole financial sector from 2018. The next leg will include a fuller version for insurers.

Related Article: New Accountability Rules for UK Bankers

The FCA wants the extended regime to be clear, simple and proportionate. They are consulting with industry, firms and consumers on their proposals. They also expect implementation to begin its effect from 2018.

Britain pushes ahead with direct accountability rules. Despite being a lonely path to take, other countries are watching. But, are they waiting to see whether the Senior Management Regime is worth replicating?


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Senior Managers Regime Accountability FCA Update in the United Kingdom