The Prudential Regulation Authority (PRA) has launched consultation on Phase 2 reforms to the Senior Managers and Certification Regime (SM&CR), proposing to replace regulatory approval with notification for almost half of senior management functions and remove certification requirements covering approximately 7,700 individuals. The package builds on the narrower reforms introduced in April 2026 within existing legislative constraints. Significant elements depend on Parliament enacting the Financial Services and Markets Bill 2026 substantially in its current form. The proposals affect around 1,200 PRA-authorised firms and accompany a parallel Financial Conduct Authority consultation. Appointments moving to notification would include chief actuaries and chairs of risk and audit committees. Firms would remain responsible for assessing candidates’ fitness and propriety before appointment, and notified senior managers would retain the same accountability standards as those requiring approval. Regulatory approval would remain for key leadership roles, including chief executives, chief risk officers and chief operating officers, with powers to require approval for otherwise notified roles in exceptional circumstances. Certification assessments on recruitment and annually thereafter, certificates and associated regulatory reference requirements would be removed. For firms subject to the Capital Requirements Regulation and Solvency II, an expanded competent employee rule would require reasonable steps to assess relevant employees’ honesty, integrity and other personal characteristics at recruitment and subsequently where there is reasonable cause to reconsider them. Individual Conduct Rules would continue to apply. Other changes would extend temporary senior management cover from 12 to 18 weeks and end routine submission of responsibility statements and management responsibilities maps following significant changes, while retaining requirements to keep them current internally. Firms with a single senior manager would generally be exempt from maintaining those documents. The PRA estimates approximately 43% fewer approval applications and annual compliance savings of GBP 11.5 million, or 47%, under its central estimate. Implementation is expected in the second half of 2027, subject to legislation and HM Treasury’s exercise of commencement powers.
UK Prudential Regulation Authority consults on removing certification requirements and reducing senior manager approvals
The UK Prudential Regulation Authority is consulting on Phase 2 SM&CR reforms that would replace approval with notification for almost half of senior management functions and remove certification requirements for approximately 7,700 individuals. Firms would retain responsibility for senior managers’ fitness and propriety, while temporary cover and reporting requirements would be eased. The package is expected to save GBP 11.5 million annually, with implementation envisaged in the second half of 2027 subject to legislative changes.