A regime of responsibilities

On 7 July, the Financial Conduct Authority issued its final rules on the Senior Managers Regime (I long to put an apostrophe in there, but the regulator has decreed it apostrophe-free, and I’m nothing if not obedient to regulatory decree) for the banking sector.  This all started back in July 2014, when the FCA and the Prudential Regulation Authority jointly published their proposals for how to implement a new governance regime to strengthen accountability within banking, following recommendations of the Parliamentary Commission on Banking Standards (which in turn followed public outcry – you know the drill).  We’ve been through a consultation process, and now it’s done and dusted: final rules are just that.  So what do they require?  Main points (but do read the whole paper yourself – what I consider to be main may not match your interpretation):

  • 17 Senior Management Functions are specified – you do not need to have all of them, but staff holding these SMFs must be pre-approved by the regulators
  • 30 Prescribed Responsibilities are specified – these are responsibilities that must be assigned to the individuals who hold SMFs (and again, some may not be relevant to your firm)
  • Individuals who have overall responsibility for activities, functions or areas of the business need to be pre-approved for SMFs – the person having overall responsibility means “the person who has ultimate responsibility, under the governing body, for managing or supervising a function; with direct responsibility for reporting to the governing body, and putting matters for decision to it”
  • There is guidance on: applying the new regime to smaller firms; sharing Prescribed Responsibilities; roles and responsibilities of non-exec directors.

Helpfully, a six-step road-map is given:

  1. Identify all entities in the group that are caught by the regime.
  2. Consider what activities, business areas or functions are performed by each entity, and which Prescribed Responsibilities will be relevant to them.
  3. For each entity, identify those individuals that hold SMFs 1 to 17.
  4. From this list, allocate the relevant Prescribed Responsibilities.
  5. For each entity, identify any individuals that have overall responsibility for any other activities, functions or business areas.
  6. Record the allocation of responsibilities.

Oh, and these final rules come into force on 7 March 2016.  Flip-charts at the ready.

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