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Advice for Solo-regulated Firms adopting SM&CR

18th February 2019

Banking leaders share insight on adoption of SM&CR

This month the FCA released a video that shares advice and insight into the Senior Managers and Certification Regime (SMCR) from senior leaders of some of the UK’s biggest financial services firms.

The former CEO of Virgin Money, the Deputy Group Chairman of HSBC, the CEO of EMEA at State Street and the CEO of EMEA at JP Morgan all gave their opinion on the SM&CR as well as advice on adopting the regime.

As we have spoken about previously, the SM&CR was initially introduced for Banks in 2016, came into effect for insurers in December last year and by the end of this year, will be rolled out to all solo-regulated firms with the aim to increase individual accountability within financial services as well as improve culture and governance.

The extension of the SM&CR to solo-regulated firms (approximately 47,000 firms) will help to ensure that staff, along with the regulator, understand who is responsible and for what within a firm and that the firm’s governance arrangements are transparent.

This video follows on from the publication of the FCA’s Guide to SM&CR for solo-regulated firms (published in July 2018) and has been produced to assist solo-regulated firms in the lead up to implementation towards the end of the year in December. The FCA has made it clear that both culture and governance is an “ongoing priority” and a key part of that work is the extension of the SM&CR to most of the firms that are regulated.

As said on the video by Jonathan Davidson, the Executive Director of Supervision – Retail and Authorisations at the FCA, “SMCR is very simple but its effects are radical, they’re going to shift the culture of financial services.”

Advice for Solo-Regulated Firms adopting SM&CR:

The CEO of EMEA at State Street, Liz Nolan said that it helped them to “drive better individual accountability through transparency, clarity and support” and that in adopting the regime it required them to look at their governance and Management Information to ensure it was as comprehensive as both the firm and the regulator needed it to be, as well as looking at decision lines and how these needed to be updated globally.

The effect of SM&CR, as found by Jon Symonds (Deputy Group Chairman of HSBC) is that “if people are clear about their roles, responsibilities and their accountability, even in a complex matrix organisation, it actually improves the quality of the interaction, the discussions and the quality of the control over the business that actually is overall beneficial.”

Whilst preparing for SM&CR may take a lot of planning, as Vis Raghavan (CEO of EMEA at JP Morgan) points out, the key piece of advice he would bestow on those about to adopt it is that it “has got to be owned and led by the business” and that “you cannot delegate it to HR or compliance or any other kind of function.”

Mr Raghavan’s comments were echoed by Ms Nolan who also agreed that it has to be a “business initiative. It’s not a compliance initiative. Compliance as a second line function are there to help and to guide but the business has to own and embrace it” so that it is understood, implemented and embedded within the business.

Preparing for SM&CR

If you are preparing for the extension of the SM&CR regime for your firm and need any support or assistance, our experienced consultants would be happy to offer their assistance. Just drop our friendly team a line.

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