Senior Managers and Certification Regime

Greater personal accountability at the top

On 7 March 2016, the first wave of the Senior Managers and Certification Regime became effective. The senior management of all UK regulated banks, building societies and any regulated business that forms part of a banking conglomerate are required to perform Senior Management Functions ('SMFs') and to have prescribed responsibilities allocated to each of them. By 8 February 2016 individual statements of responsibility for the first senior managers will have been submitted to the FCA and PRA, setting out the specific responsibilities of the role(s) of those senior managers and how they are built into the overarching corporate map of responsibilities.

Should the regulated firm experience a serious business shock such as a hole in its balance sheet, the regulators will seek to use the corporate map of responsibilities and the underlying individual statements of responsibilities to identify which senior managers of the business should be held accountable for that business failing. The regulators will also assess the quality and integrity of each senior manager's personal dealings with them and in particular, whether that senior manager made appropriate disclosure to his/her regulators of any material issues the business was experiencing. A senior manager is also expected to provide a handover statement to his/her successor when they stand down which could form a further focal point of personal accountability. The regulators can take regulatory action against an individual up to 6 years after they became aware of any potential misconduct.

This is meant to be a step change regulatory development aimed at changing the culture of banks and ensuring a new tone is set from the top. The regulators have already required individual attestations from CEOs and this is a continuum of the regulators requiring the most senior managers of their regulated firms to take personal responsibility for what is said and done in relation to any regulatory obligations during their tenure.

An individual senior manager will also be personally responsible for overseeing his or her bank's implementation of the new certification regime. Unlike senior managers, more junior staff will no longer be required to be directly approved by the regulators. Instead those individuals who are not senior managers but who are nevertheless performing a 'serious harm' function will have to be certified by the bank as fit and proper. Thereafter there will be an annual requirement to certify every such individual as continuing to be fit and proper. To assist a bank employer assess the fitness and propriety of any new joiner, there will be a prescribed regulatory reference required from each of that individual's previous employers for the past 6 years.

In 2018 the senior managers and certification regime will be rolled out to all of the FCA's regulated firms.

How can we help you?

Withers' employment and regulatory team is experienced in advising senior managers in navigating their way through contractual negotiations and related regulatory issues at the point of entry or exit from a PRA and FCA regulated firm. Should there be a need for a senior manager to have to engage with the regulators themselves, we are experienced in dealing with high profile regulatory enquiries and investigations that may affect these individuals. When an individual is involved in such regulatory interactions, we understand that their entire reputation and wealth may be at stake and we are experienced in dealing with these sorts of personal issues and the potential impact on the individual concerned.

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