KPMG responds to the FCA's consultation on the implementation of the Senior Managers & Certification Regime (SMCR) to all regulated financial services firms.
The FCA has today issued a consultation on the implementation of the Senior Managers & Certification Regime (SMCR) to all regulated financial services firms. Commenting Suvro Dutta, Banking Partner KPMG UK says:
“The SMCR has driven a demonstrable strengthening of how banks approach culture, customer centricity and personal accountability. I am confident that its impact on the wider financial services sector will be equally as positive.
“The UK is leading the way on accountability and governance and other jurisdictions are already beginning to take a leaf out of the FCA’s book on this.
“We welcome that proportionality has been recognised including insurance getting a separate consultation, and whilst I am sure there will be more debate, it is heading in the right direction. Initial proposals are closely aligned to what has been introduced for the banking sector. Also, other sectors can benefit from the experience of the banks and identify where some of the sticking points may be.
“There are three core issues I expect to see raised in responses to the FCA’s consultation including the obligation for this to be applied where the legal entity sits. Some firms, especially asset managers, often operate through multi-jurisdictional management structures rather than legal entities so this will need further consideration.
“Firms will also need to be thoughtful in ensuring clear lines of distinction between executive and non-executive functions when responsibilities are defined. The Certification Regime will mean that for the first time the responsibility sits with firms, not the regulator, to identify who is in the scope of this regulation. Getting that right can be more complex than it first appears.
“Finally, and crucially, firms need to embed this into their business-as-usual operations. This is not a regulation that is designed to sit outside of the core structure: it has to be integrated into existing governance structures. In banking this took time and for many is still an on-going process.
“We have worked with firms and know that done well, SMCR can genuinely act as a positive force for more effective governance. There will inevitably be implementation challenges but none of them are insurmountable and the end product will be a robust and well governed financial services sector which will better serve consumers, capital markets and ultimately the real economy.”
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