Overview

The Senior Managers and Certification Regime (SM&CR) is a regulatory framework designed to enhance individual accountability in the financial services sector. It ensures that senior individuals are responsible for their roles and conduct, promoting better governance and risk management.

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have published consultation papers CP18/25 and CP25/21, respectively, proposing reforms to the SM&CR. These reforms aim to streamline the regime, reduce regulatory burden, and improve efficiency, while maintaining high standards of governance and accountability.

Why Are They Consulting?

• Both regulators are responding to feedback from stakeholders and industry following the joint Discussion Paper DP1/23 and HM Treasury’s Call for Evidence. The consultations aim to:
• Address concerns about delays in senior manager approvals.
• Simplify complex and overlapping requirements.
• Improve proportionality, especially for smaller firms.
• Prepare for potential legislative changes that could enable broader reforms.

Key Objectives

• Improve the efficiency and effectiveness of the SM&CR.
• Reduce unnecessary compliance costs and administrative burden.
• Support UK competitiveness and growth in financial services.
• Maintain accountability and governance standards.
• Lay the groundwork for Phase 2 reforms, pending legislative changes from HM Treasury.

Proposed Regulatory Scope

• FCA (CP25/21): Proposes raising financial thresholds for firms to be classified as Enhanced.

Main Proposals

Shared Proposals (FCA & PRA):

• 12-week rule: Amend to allow firms 12 weeks to apply a Senior Management Function (SMF), with the individual continuing in role until the application is determined.
• Criminal Record Checks: Extend validity from 3 months to 6 months; waive checks for internal moves within the same group.
• Statements of Responsibilities (SoRs): Allow periodic submission (every 6 months) rather than immediate updates for each change.
• Certification Regime: Streamline annual assessments; allow digital certificates, clarify that digital submissions can be made; remove duplication where individuals hold overlapping roles.
• Regulatory References: Shorten response time from 6 weeks to 4 weeks; clarify what misconduct should be disclosed.
• Conduct Rules: Provide clearer guidance on what constitutes a breach and when it must be reported.

PRA-Specific Proposals:

• Exempt resolution administrators from SM&CR during financial distress or stabilisation.

FCA-Specific Proposals:

• Whilst this won’t affect credit unions, the FCA propose to raise thresholds for Enhanced firms:
  • Assets under management: £50bn → £65bn
  • Consumer credit revenue: £100m → £130m
• Extend time to update the Directory from 7 to 20 business days.
• Simplify Management Responsibilities Maps (MRMs).

Policy Framework and Justification

• Both regulators justify the proposals based on:
• Stakeholder feedback from DP1/23 and industry roundtables.
• Legal obligations to consult and ensure proportionality.
• Alignment with statutory objectives:
  • PRA: Safety and soundness of firms.
  • FCA: Consumer protection, market integrity, and international competitiveness.

Anticipated Outcomes

• Faster onboarding of senior staff.
• Fewer delays and less paperwork.
• Clearer guidance and expectations.
• Better alignment between regulators.
• Continued high standards of governance and accountability.
• Enhanced attractiveness of the UK as a financial centre.

What Does This Mean for Credit Unions?

Key Implications:

Reduced Regulatory Burden:

• Less frequent updates to SoRs and MRMs (every 6 months).
• Streamlined certification processes embedded into HR workflows.
• Digital certificates permitted.
• Removal of duplication for overlapping certification roles.

• Directory Requirements:
  • More time to update entries (20 business days).
  • Continued obligation to maintain accurate records.
• Enhanced Firm Classification:
  • Raised thresholds mean most credit unions will remain Core firms, avoiding stricter Enhanced requirements.
• Conduct Rules:
  • Clearer guidance on what constitutes a breach.
  • Clarification on disciplinary actions and reporting expectations.

Summary:

Consultation Questions Include:

• Do you support the proposed changes to the 12-week rule?
• Are the changes to certification and regulatory references helpful?
• Should the thresholds for Enhanced firms be raised?
• Is the guidance on Conduct Rules clear and sufficient?
• What further changes should be considered in Phase 2?

ABCUL’s view: FCA CP25/21 SM&CR Review

ABCUL welcomes the FCA’s consultation and broadly supports the reforms to the Senior Manager and Certification Regime, specifically to reduce regulatory burden for our member credit unions.

ABCUL supports the changes in SMF approvals particularly the extended timescale for of the 12-week rule.. Furthermore, extending the criminal record check validity time from 3 to 6 months and allowing for longer timeframes when submitting statements of responsibility and Directory updates could ease the administrative burden. ABCUL welcomes the clarified guidance that certification can be digital instead of hard copies.

Alignment with the PRA with the periodic updates is welcomed, and ABCUL hopes this will create consistency, predictability and reduce the burden for credit unions. ABCUL partially supports reduction of the time in which firms must respond to regulatory reference requests to 4-weeks; we feel this is a proportionate timescale for our member credit unions but flexibility must be provided in exceptional circumstances.

ABCUL’s view: PRA CP18/25 Review of the Senior Managers and Certification Regime

ABCUL notes that there are significant similarities between the PRA and FCA consultation on the Senior Managers and Certification Regime. ABCUL will provide its view here that has not been explored in the above FCA view.

ABCUL welcomes the PRA’s proposals to apply Senior Manager Conduct Rules to interim SMFs; this will ensure accountability and stability for any transitional periods.

ABCUL agrees with the proposed changes to allow firms to have more discretion in conducting annual fit and proper assessments, which allows for greater proportionality and more effective use of time and resources

ABCUL notes the PRA’s proposals to update gendered language and improve the navigability of SM&CR to improve visibility of SMF responsibilities, as well as the removal of outdated references such as legacy mentions of EU regulations or directives.

Next Steps

• Consultation deadlines: Both consultations close on 7 October 2025.
• Final policy statements: Expected mid-2026.
• Phase 2 reforms: May follow, depending on HM Treasury’s legislative changes.

ABCUL is eager to hear our member credit unions’ views on the proposals and asks that all responses be sent to advocacy@abcul.org and received by the close of business on Friday, 3 October 2025.