What the banks learnt from implementing SMCR

The first wave of institutions to embed the Senior Managers and Certification Regime found that they needed buy-in across the organisation, a detailed understanding of business areas and careful planning. Emma Sutcliffe and Penny Miller set out the lessons for the larger tranche of firms now required to align their accountability procedures.

Emma Sutcliffe (emma.sutcliffe@simmons-simmons.com) is a partner in the financial markets litigation group at Simmons & Simmons, while Penny Miller (penny.miller@simmons-simmons.com) is a partner in the financial services regulation practice. Nadine Helène (nadine.helene@simmons-simmons.com) is a supervising associate in the firm’s financial markets litigation group.

Let us remind ourselves why the Senior Managersand Certification Regime (SMCR) was introduced in the first place: to address the shortcomings of senior individuals who failed to accept personal responsibility for their role in shaping and influencing the financial markets, and who, ultimately, significantly contributed to the financial crisis. This concept, often referred to as ‘individual accountability’ by the Financial Conduct Authority, while important at senior levels, does not only focus on those people who sit at the top of a firm. The FCA and Prudential Regulation Authority want that individual accountability to permeate all levels of businesses, where employees put customers at the forefront and personal interests (often rewarded by substantial personal financial benefit) in second place. Central to this idea is that if you create firms and an industry where everyone takes responsibility and accepts accountability for their actions then you drive significant cultural change across the financial services sector. One of the other novel features about the SMCR is that firms are themselves required to take ownership of this rather than relying on the FCA to be the only guardian of the regime, and the certification process along with its implementation has been a key part of the introduction of the SMCR.