FCA and PRA propose £2bn overhaul of senior managers regime

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have unveiled proposals to simplify the Senior Managers and Certification Regime (SM&CR), potentially saving UK financial services firms around £2bn over the next decade.

Announced on 22 October, the reforms would significantly reduce regulatory approval requirements and remove the Certification Regime, which currently requires around 139,000 financial services employees below senior management level to undergo annual certification checks.

The regulators said the changes would reduce administrative burdens, support recruitment and encourage investment and innovation, while maintaining high standards of individual accountability and conduct.

Introduced a decade ago, the SM&CR was designed to strengthen accountability among senior decisionmakers following the global financial crisis.

Regulatory approvals to be reduced

Under the proposals, regulatory pre-approval would no longer be required for several senior functions, including Chief Actuaries and Chairs of Risk and Audit Committees.

Instead, firms would notify regulators directly of these appointments, while remaining responsible for ensuring individuals are fit and proper.

Pre-approval requirements would remain in place for key leadership positions, including chief executives, chief financial officers and chairs.

The regulators would also retain powers to require pre-approval for other appointments in higher-risk circumstances.

Further changes include removing the Certification Regime’s annual checks and associated Financial Services Register requirements, raising the threshold for reporting conduct rule breaches involving most employees below senior management level, and simplifying mandatory conduct training.

According to the PRA, the reforms are expected to reduce its SM&CR pre-approvals by 43% and halve the overall administrative burden of its regime.

For larger FCA-regulated firms subject to the Enhanced Regime, around 15% of senior management applications would move to notification requirements, with two senior management functions removed.

PRA outlines new regulatory priorities

The announcement coincided with speeches at Mansion House by PRA Chief Executive Katharine Braddick and FCA Chief Executive Nikhil Rathi.

Braddick outlined a new five-year strategy for the PRA, focused on four priorities: financial sector resilience, growth and competitiveness, innovation through data and technology, and greater regulatory transparency.

The strategy also reflects the regulator’s intention to modernise its approach while ensuring financial institutions remain resilient to emerging risks.

“The Senior Managers Regime is an essential part of the UK’s regulatory framework. These proposals keep checks in place for the most important roles, meaning individuals are accountable for their actions, but reduce the administrative burden where it isn’t needed, giving firms more time to invest in growth-focused activities and greater flexibility in onboarding senior talent.”

Sarah Pritchard, Deputy Chief Executive of the FCA, added: “SM&CR has delivered significant improvements in accountability and governance across financial services. We remain committed to ensuring individual accountability and good standards of behaviour across financial services. But we can achieve the same impact with a more streamlined regime, supporting our aim to be a smarter regulator.”

Responding to the consultation, the Finance & Leasing Association (FLA) welcomed the proposed changes, highlighting the importance of maintaining accountability while reducing unnecessary compliance requirements.

“The FLA supports a regulatory framework that promotes high standards of accountability while remaining proportionate and effective in practice.

“The proposals represent a significant review of the SM&CR and seek to reduce operational burdens on firms while maintaining appropriate oversight and conduct standards.

“Our members play a vital role in providing finance to millions of consumers and businesses across the UK. It is important that regulation protects customers and supports confidence in financial services, while enabling firms to focus resources on delivering good customer outcomes and supporting economic growth.”

Consultations open until January 2027

The proposals form the second major phase of SM&CR reform, following changes introduced in April 2026 that included greater flexibility for temporary senior management appointments and reduced duplication of certification requirements.

Some of the latest measures will require legislative changes before they can take effect.

The FCA and PRA have launched parallel consultations, with responses invited until 22 January 2027 and final policy expected to follow later in 2027.

The FLA has highlighted its engagement with the FCA throughout the review process.

“The FLA has worked constructively with the FCA throughout its review of the SM&CR, and it is positive to see a number of industry concerns reflected in the proposals. We look forward to discussing the consultation with our members and responding in due course.”