4 mins watch time
July 2022 Horizon scanning
It is now six years since the Senior Managers and Certification Regime (SMCR) was introduced in the UK, initially to banks regulated by the FCA and PRA, and then, in December 2019 to all sole regulated firms.
It’s worth spending a few sentences looking at the antecedents of this regulation. It was the result of a parliamentary commission set up in July 2012, in the wake of the financial crisis, to recommend improvements in UK banking.
The commission’s subsequent report stated that “an environment of insufficient personal responsibility” allowed executives to evade the consequences of decisions. Moreover, it said, the then prevailing Approved Persons Regime “had created a largely illusory impression of regulatory control while meaningful responsibilities were not in practice attributed to anyone.”
It was these shortcomings that the SMCR was designed to cure, and it made senior managers (SMs) responsible for failures of conduct and control that happened on their watch. Whether the SMCR has lived up to its billing as the big stick required to keep recalcitrant bankers in line is a matter of debate, but the message remains clear: fall foul of SMCR and you could head straight to jail. It’s serious.
However, systems currently in place are not protecting SMs. It should be a matter of concern that fully one-third of asset managers, or 64 firms, failed to meet the criteria for acceptance to the new UK stewardship code in September.
There are three main ways in which current risk control procedures are failing.
According to the FCA, the first two senior manager conduct rules are “You must take reasonable steps to ensure that the business of the firm for which you’re responsible is controlled effectively” and “You must take reasonable steps to ensure that the business of the firm for which you’re responsible complies with the relevant requirements and standards of the regulatory system.”
This can only be accomplished if a SM has a complete and comprehensive view of risk and controls across the whole business, front to back. Once again, data holds the keys to the castle, and fitting technology is needed to mine that data.
Acin has a comprehensive, pre-built risk and control quick start library of inventories constructed through industry consultation and mapped to regulatory guidance, to provide immediate value and accelerate impact. Easily and proactively demonstrate to the regulator, auditors, investors, shareholders, and boards that you are managing climate risk – ahead of regulatory deadlines.