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On 16 October, the PRA held a briefing for professional services firms following the publication of final rules and guidance on the Senior Managers and Certification (SM & CR) regimes in the summer.
The session summarised the PRA’s SM & CR requirements and the steps that PRA regulated firms and the PRA need to take in order to implement the new regimes from 7 March 2016.
Key points emphasised by the PRA during the session can be summarized as follows:
1. The PRA are keen to stress that the SM & CR is a supervisory framework and not an enforcement regime. The SMR aims to establish effective supervisory outcomes governance in line with the PRA's general objective to promote the safety and soundness of firms it regulates. The PRA underlined that it is rare to find prudential issues or bank failings that cannot be traced back to an issue with governance.
2. One of the key points arising from the HM Treasury consultation released on 15 October 2015 proposes to replace the presumption of responsibility with a duty of responsibility. Many industry insiders see this as a PRA concession although the PRA were keen to stress that they have not amended this concept as a result of industry pressure. The PRA is promoting the SM & CR as a welcome replacement to the APR found to be inadequate and not fit for purpose by the PCBS The outcomes of the HM Treasury consultation is expected early in 2016.
3. The PRA stated that it has been very surprised at the negative reaction of the industry to the SMR. It had presumed that the industry would not see this as a major change from the Approved Persons Regime. In the PRA's view, the new regime is not a stick to beat firms with but a way to bolster governance. The PRA hopes that firms will implement the requirements holistically rather than taking a check box compliance or over-legalistic approach particularly to the preparation of Statements of Responsibility (SoR). The PRA were keen to stress that the SoRs should be used to clarify responsibilities in a succinct manner (within approximately 300 words per responsibility) and should not be used to evade responsibilities.
4. Currently, firms should be considering the SM & CR requirements and be preparing the grandfathering notification forms, SoRs for each senior management function and a management responsibilities map to be submitted via Connect by 8 February 2016 with the regime being implemented by 7 March 2016. The PRA encourages firms to submit the forms as soon as possible and not to wait until the 8 February deadline.
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