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A look at the Senior Managers and Certification Regime

Senior Managers Certification RegimeSenior Managers Certification Regime

Having been almost three years in the making, the Senior Managers and Certification Regime (SMCR) came into effect on 7 March 2016.

To get to this point, hundreds of pages of legislation, rules and guidance were consulted on, spawning an intense debate over the objectives and details of the regimes. A book has even been published on the subject[1], which, somewhat dispiritingly, includes a chapter entitled: ‘How can I best protect myself and keep the Regulator at bay?’

There is more to come, as firms are now in the process of certifying their staff and regulators are considering how to apply the regime to other sectors outside of banking.

So while everyone pauses for breath after having cleared last Monday’s milestone, it seems like a good time to remind ourselves of the core purposes of the regime.

Origins of the SMCR

Much of the public debate to date has focused on achieving better conduct outcomes through improving personal accountability: of senior managers to the regulators for their actions (and omissions), and of regulators to Parliament for their supervision of these senior managers.

But the SMCR is about more than improving accountability.

In its landmark 2013 report, Changing Banking For Good, the Parliamentary Commission on Banking Standards set out a clear and compelling rationale for reform. Its recommendations paved the way for the development of the SMCR and other policy, regulatory and industry-led initiatives (including, in the latter case, the creation of the Banking Standards Board).

And it is true that a need to improve personal accountability was a central feature of this report. But another prominent theme was that of professionalism. Specifically, how the lessons from other industries that are commonly regarded as ‘professions’ – eg, accountancy, law, medicine – could apply in banking.

This theme of professionalism is highly relevant to us at the BSB. It is also central to the purpose of the SMCR. Indeed, the Certification Regime is analogous to licensing regimes that form the bedrock of other professions, effectively creating a licence to practice granted to individuals on the basis of their ability to meet certain levels of competence and willingness to observe high standards of behaviour and conduct.

In professions that employ licensing regimes, it is common for one or more central authority – typically a professional body, a regulator, or both – to play some role in the process. Yet no such role has been prescribed to support the operation of the Certification Regime. Responsibility for issuing certificates – and therefore for ensuring that those who are certified are ‘fit and proper’ – will rest solely with regulated firms. This raises some significant challenges.

Making certification work

To make certification work as it should, the industry will need to apply the spirit of the regime in a coordinated way. To this end, the BSB is working with its members, and others, on some key issues.

First, it is important to articulate the standards of behaviour and competence that customers and clients of banks and building societies have a right to expect, and that the industry should therefore commit itself to upholding. The regulation sets the baseline, but this can only be a starting point. Building on it, we are working with firms on different ways of assessing these standards in practice, both on ‘entry’ into certification and on an ongoing basis, to develop some principles of good practice to inform such assessments.

Second, it is important that those who commit misconduct are unable to move freely between firms without their track record following them. Equally important, however, is the need to capture the attainment of high professional standards in a way that will be recognised by prospective future employers, to ensure that implementation of the regime is not framed solely around recording breaches of rules. A common way of recording and displaying this information – specifically, through a standardised certificate – is something that we are developing with member firms.

Third, we are looking at what support is currently available from existing professional bodies in banking, for example in the form of training and accreditation, and to what extent these are aligned with the requirements of the Certification Regime. Where are the gaps and is there the potential to go further? What we can learn from evidence and experience in other jurisdictions, for example the Netherlands, where bankers must make a personal commitment to uphold high levels of personal conduct in order to receive and continue to hold their licence to practise?

But most importantly, employees must be central to the development of this regime. This is an opportunity for staff to invest in their own development and to see Certification as an endorsement that they meet – and are willing and able to maintain – the highest standards of professionalism. For firms, it is an opportunity to ensure that they have the right people in the right roles and with a renewed commitment to high standards of ethical behaviour.

This will take time to get right. There is, of course, the immediate need to have the necessary measures in place now that the regime has come into effect. But these measures need to form part of the foundation of something much bigger and broader, and that will underpin a significant change in expectations and culture.



Senior Managers and Certification Regime

Exploring how the SMCR - and especially Certification - can be implemented in the most effective way across the sector.

The Senior Managers and Certification Regime is a major regulatory change that will affect all banks and building societies. Responding to recommendations by the Parliamentary Commission on Banking Standards, the government and regulators have together developed a comprehensive framework to ensure better accountability and responsibility for behaviour, competence and culture in banks and building societies. The new framework provides an opportunity for the industry to focus on and demonstrate a culture of professionalism. We are working with firms and regulators to facilitate this, including areas where a common approach across firms could support both the objectives of the regime and the skills and development of the people covered by it.


Evaluating whether a more 'professional' approach to banking would improve behaviour and competence across the industry.

The Parliamentary Commission on Banking Standards found that 'banking culture has all too often been characterised by an absence of any sense of collective responsibility to uphold the reputation of the industry', and argued that a greater focus on professionalism could be an answer to this. Working with a leading team at the University of Leeds, we are researching the issues around professionalism in banking. In particular, we are reviewing how professional qualifications are currently used across the sector, and at whether a stronger role for professional bodies, along the lines seen in some other sectors, like medicine or law, would help raise standards. To inform this work and develop a rounded picture of 'professionalism' and what it means in banking, we are surveying banks and building societies, professional bodies and a wide range of other interested groups, including consumer bodies and investors.


Providing an honest and impartial assessment to Boards of progress against objectives on behaviour, competence and culture.

The BSB assessment exercise presents Boards with an objective and impartial view of their firm's culture, identifying where things are working well and recommending areas for improvement. It draws on information not only from Boards and senior teams, but also from employees, investors (or members), trade unions, customer groups and other relevant bodies. In doing so, it will provide constructive challenge to each firm individually, while building a collective understanding of common issues across the industry, or sectors within it. We undertook our first annual assessment exercise in 2015 with ten firms (Barclays, Citi, HSBC Bank, Lloyds Banking Group, Metro Bank, Morgan Stanley International, Nationwide, RBS, Santander UK and Standard Chartered). The BSB itself will not publish individual assessment reports - each firm owns its own report - but key themes and messages will be set out in the BSB's annual report, the first of which will be published in Spring 2016. Given that Board engagement is central to the assessment work, only firms that have their headquarters in the UK are eligible for the full assessment exercise. All firms, including branches of firms headquartered overseas, will however be included in a focused membership-wide survey, which will allow each participating firm to benchmark itself against its peer group.



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