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Freshfields Risk & Compliance

| 1 minute read

UK Finance report on the impact of the Senior Managers and Certification Regime

The Senior Managers and Certification Regime (the “Regime”) replaced the Approved Persons’ Regime in 2016 as a direct result of the conduct failings exhibited during the banking crisis a decade ago, with the aim of making Senior Managers more accountable and establishing a healthy culture.

Three years on, UK Finance has published results of a study involving individuals at banking institutions to find out whether the Regime has made any real differences to practice and policy.

The results were positive overall. Meaningful change was identified by the majority following the introduction of the Regime and there was particular awareness amongst Senior Managers of the impact of their behaviours. Firms were also being proactive in identifying breaches of conduct rules and looking into regulatory references for new hires with greater scrutiny than ever, often adopting a zero tolerance approach that is to be applauded given the aim of the Regime.

However, the results observe that there are several areas for which the Regime should not be viewed as a ‘fix-all’ solution. The increased focus on decision-making had become too complex and produced a more risk-averse industry. Given the incidents that this Regime was brought in to prevent, this should hardly come as a shock.

Indeed, the increased obligations, which it was found resulted in Senior Mangers giving greater thought to the Regime in their everyday lives, indicate that the increased burden has been accepted, as has the attitude to risk that accompanies it.

Although the results of the Regime are undoubtedly a step in the right direction, the report acknowledges that increased clarity from the PRA and FCA regarding the application of rules in areas such as duty of responsibility or breach of conduct ought to be provided to ensure that institutions align and respond correctly to the Regime’s rules. It also seeks separate guidance for smaller institutions, which may struggle to adopt the same stringent policies and procedures that larger institutions have begun to embed into their cultural framework. From 9 December 2019, the Regime will be extended to apply to FCA solo-regulated firms. The extent of each firm’s obligations under the Regime will be dependent on which of three categories it falls into.

Whether this report demonstrates a cultural turning point for banks remains to be seen. Nonetheless, a positive leap forwards in just a few short years could be a good indicator of things to come. If you would like assistance on the application of the Regime to your organisation, please reach out to Caroline Stroud, Christopher Robinson, Emma Rachmaninov or Kate Pumfrey, or your usual Freshfields contact.


europe, employment, data, culture and accountability, governance, financial services