This page contains latest news, the background and key changes to the accountability regimes for PRA regulated firms, together with links to materials and information on forms and policy development, and what's coming up.
On 9 May Andrew Bailey gave a speech entitled 'Culture in financial services - a regulator's perspective' at the City Week 2016 Conference. In the speech he cited the introduction of the Senior Managers and Certification Regime as an important step in tackling problems with culture in financial services.
Culture in financial services - a regulator's perspective - speech by Andrew Bailey
On 4 May, the Bank of England and Financial Services Bill received Royal Assent, making it an Act of Parliament - the Bank of England and Financial Services Act 2016 (the Act) (see External Links). This includes statutory changes to the Senior Managers and Certification Regimes. The PRA and FCA may be required, or find it appropriate, to consult in due course on modifications to the rules and expectations already consulted on and published. The PRA will provide updates on this webpage and other channels, including firms’ usual supervisory contacts.
On 31 March, the PRA published PS13/16 'Corporate governance: Board responsibilities' and SS5/16 'Corporate governance: Board responsibilities'. See also the Strengthening accountability - Policy development webpage (Related Links).
Update on 7 March 2016 - The Senior Managers Regime and Senior Insurance Managers Regime have now been implemented. See below for summaries on updates to banking and insurance following implementation.
- Banking - the Senior Managers Regime is aimed at supporting a change in culture at all levels in firms through a clear identification and allocation of responsibilities to individuals responsible for running them. This is an important element of the PRA’s approach to the assessment of management and governance at firms, and part of the integrated and structured way that the PRA delivers its forward-looking judgement-based approach to banking supervision. The PRA will therefore consider the information provided by firms in their submission as part of the usual supervisory cycle and in any cross-firm analysis.
- Insurance - the letter from Sam Woods, Executive Director of Insurance Supervision, on 25 August 2015 set out the path to implementing the Senior Insurance Managers regime fully. The letter outlines the key dates beyond 7 March 2016 for insurance firms. On 7 September 2016, Solvency II firms and groups must have a Scope of Responsibilities in place for all Senior Insurance Management Functions. Also on 7 September 2016, all Solvency II firms and groups must also have notified the PRA of all Key Function Holders. Firms may find the SIMR Q&A of 21 December 2015 helpful.
- Approvals under the SMR and SIMR. For information on approvals, and how to submit, amend and withdraw approvals under the new regimes, please visit the Senior Managers and Senior Insurance Managers regimes - Approvals (below and Related Links).
Senior Managers and Senior Insurance Managers regimes - Approvals
- Further updates on Strengthening accountability: These pages will continue to host further updates and information on the accountability regimes. See the Policy Development page for information on policy. All updates before 7 March 2016 are available in the document below.
On 7 March 2016 the PRA also published its own internal application of the Senior Managers Regime. This follows the Treasury Select Committee's recommendation that the PRA complete a Responsibilities Map in line with the core principles of the SMR for banks. The PRA response to this recommendation is published below.
As part of implementing the recommendations in the final report of the Parliamentary Commission on Banking Standards (PCBS), in 2014 the PRA and Financial Conduct Authority (FCA) started developing new Senior Manager and Certification Regimes that will help to support a change in culture at all levels in ‘relevant authorised persons’. The PRA is also replacing its Approved Persons Regime for insurers.
The key changes
From 7 March 2016, the Senior Insurance managers Regime and Senior Insurance Managers Regime introduced:
- A new ‘Senior Managers Regime’ (SMR) and ‘Senior Insurance Managers Regime’ (SIMR) for individuals who are subject to regulatory approval, which will require firms to allocate a range of responsibilities to these individuals and to regularly assess their fitness and propriety.
- A ‘Certification Regime’ (CR) for banking firms which will require relevant firms to assess the fitness and propriety of certain employees who could pose a risk of significant harm to the firm or any of its customers.
- A new set of ‘Conduct Rules’ applying to banking and Solvency II firms that includes the responsibility of senior managers for oversight of any delegated activities.
The implementation timetable was announced by HM Treasury on 3 March 2015. See the full announcements, a link to HM Treasury’s Transitional Provisions Order, and a link to the FCA’s website in External Links.
Links to forms for approvals under the new regimes, and a table with links to all PRA policy publications are available in Related Links.
What’s coming up – as at 26 May 2016
- Second tranche of regulatory references rules
 ‘Relevant authorised persons’ is defined in section 71A of the Financial Services and Markets Act 2000 and covers banks, building societies, credit unions and PRA-designated investment firms.