Firms subject to the Senior Managers and Certification Regime (SM&CR) are set to gain more flexibility and lower compliance costs under reforms confirmed on April 22 by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).
The changes form the first phase of a wider government and regulatory reform package intended to streamline the regime while preserving the core principle of senior manager accountability. The move sits within the government's "Leeds reforms" agenda, which aims to reduce regulatory administrative burdens and support the UK's competitiveness as a financial centre.
Phase one reforms are due to take effect from April 2026. They include giving firms more time to submit senior manager applications where there has been an unexpected or temporary change, easing pressure around short-notice appointments and interim cover.
The regulators will no longer require firms to certify individuals for multiple overlapping functions, a change expected to reduce the number of certification roles by around 15%. This is particularly relevant for larger insurance groups where senior staff often hold several roles across different entities.
Thresholds that determine whether a firm is treated as an “enhanced” firm under SM&CR will be raised by 30%, so only larger and more complex firms will have to meet the most demanding standards. Firms will have longer to report updates to statements of responsibilities and management responsibilities maps, and the period for which criminal record checks remain valid before a senior manager application is submitted will be extended. The time allowed to update the public directory of certified staff will also increase.
The FCA is clarifying the definition of some senior management roles, addressing long-standing questions around group-level responsibilities and borderline functions.
Alongside the regulators’ policy statement, HM Treasury has published its response to a consultation on broader SM&CR reform. The government proposed removing the Certification Regime from primary legislation and giving the FCA and PRA greater flexibility to decide, through their own rulebooks, which senior management functions need prior approval.
Those changes are intended to enable a second phase of SM&CR reform once the necessary legislation is in place. The government has signalled that this phase will be consulted on later in 2026 and used to further streamline the regime, including potentially reducing the number of pre-approval roles and allowing more discretion over how firms structure governance.
This could pave the way for simpler senior management frameworks, fewer dual-hatted roles requiring separate approvals, and closer alignment between regulatory functions and internal accountability lines. However, with more detail likely to be contained in FCA and PRA rules rather than in statute, firms may need to monitor regulatory updates more closely.
The reforms build on earlier work to speed up SM&CR approvals. Recent FCA metrics showed that 99.7% of applications were determined within the current three-month statutory deadline, with 94.7% concluded within the government’s proposed new two-month deadline. The PRA’s latest figures showed 100% of applications determined within three months and 98% within two months.
Lucy Rigby, Economic Secretary to the Treasury, said the UK has “some of the highest standards for financial sector governance in the world”, describing them as a key part of the country’s economic strength. She said the reforms are intended to preserve those standards while making regulation “simpler and easier to navigate”, and to cut what she characterised as unnecessary complexity and administrative burden.
Sarah Pritchard, deputy chief executive at the FCA, said the joint reforms would keep consumers and markets protected while making the regime more proportionate, noting that the regulators had used their existing powers to streamline aspects of SM&CR ahead of any legislative changes.
David Bailey, executive director for prudential policy at the PRA, said SM&CR plays an important role in ensuring accountability in financial services but should be “well targeted and efficient”. He described the latest steps as an initial move towards allowing firms to focus more on core business priorities.
The insurance industry has broadly welcomed the direction of travel.
David Otudeko (pictured), ABI director of regulation, commented: “The FCA and PRA’s Senior Managers & Certification Regime (SM&CR) policy statements mark a welcome step towards reducing operational complexity while maintaining robust standards of individual accountability."
Otudeko added that the measures will help streamline processes and simplify some of the complexity that firms currently face under SM&CR.
"We’re pleased to see the regulators take a pragmatic approach to improve the regime’s efficiency, alongside the intended legislative changes announced today by HM Treasury to enable more far-reaching reform," he said.
