SM&CR Phase 1 reforms enhance accountability flexibility
The Prudential Regulation Authority (PRA) has published its Phase 1 reforms to the Senior Managers and Certification Regime (SM&CR). These changes, effective April 24, 2026, aim to streamline the regime and increase flexibility for firms while maintaining robust accountability.
Boosting flexibility for senior appointments
The PRA's Phase 1 reforms introduce several key adjustments to the SM&CR.
A central change increases flexibility for firms in making senior appointments, particularly through amendments to the '12-week rule'.
This rule, which allows temporary coverage of Senior Management Function (SMF) vacancies, now permits firms to submit a complete SMF application within 12 weeks of an absence, rather than requiring full review and determination within that period.
Further clarity is provided on the scope of the Senior Managers Regime, including the Group Entity Senior Manager function (SMF7), with exclusions for appointments related to the resolution or stabilisation of deposit-takers.
The reforms also streamline aspects of the application process, such as statements of responsibilities, regulatory references, and criminal record checks, aiming to reduce administrative burden and enhance firms' ability to navigate the regime effectively.
A phased approach to accountability
The SM&CR, established in 2016 post-financial crisis, ensures senior decision-makers are accountable for their actions, enhancing financial stability.
Industry feedback from a 2023 joint PRA/FCA discussion paper and HM Treasury call for evidence highlighted a strong desire to streamline the regime without compromising its benefits.
These Phase 1 reforms, not requiring legislative changes, are the initial step in a multi-stage effort.
A more extensive Phase 2, dependent on legislative amendments to the Financial Services and Markets Act 2000 (FSMA), is planned for future consultation, aiming for further regulatory burden reduction and a more proportionate Certification Regime.
Necessary adjustments, not an overhaul
These Phase 1 reforms offer welcome, albeit limited, operational efficiencies for firms navigating the SM&CR.
While they address some administrative burdens, the most significant changes are deferred to a future Phase 2, constrained by the need for legislative amendments.
Consequently, this initial phase represents a targeted refinement rather than a transformative overhaul of the accountability framework.