The Financial Conduct Authority and Prudential Regulation Authority have unveiled the opening phase of their reform of the Senior Managers and Certification Regime (SMCR), setting out a package of changes designed to strip out operational friction while preserving individual accountability.
According to RiskSmart, the measures come into force from April 2026 and mark the first stage of a wider programme of reform expected to unfold over the next 12 to 24 months. For regulated firms, the announcement signals a recalibration of how the regime works in practice rather than any shift in regulatory philosophy.
RiskSmart recently delved deeper into how the FCA and PRA have begun its SMCR simplification programme.
Both regulators have conceded that parts of SMCR have grown operationally complex and, in places, duplicative. This initial phase deliberately targets improvements that can be delivered without legislative reform, with more fundamental structural change anticipated to follow.
Among the most immediate impacts is a reduction in certification scope. By removing duplicate certification requirements for individuals performing overlapping functions, the regulators expect the certified population to shrink by around 15%. For many firms, this will materially cut the scale of annual certification exercises and ongoing record-keeping, signalling a move towards a more proportionate, risk-focused approach.
Fewer firms will also be caught by the Enhanced tier of the regime. Thresholds for Enhanced firms are set to rise by 30%, pushing a number of firms into the Core category. Given that Enhanced firms face more detailed governance, documentation and oversight obligations, reclassification should deliver a noticeable reduction in ongoing SMCR workload and ensures the most intensive requirements fall primarily on the largest and most complex institutions.
Senior manager processes are also being loosened. Firms will gain more time to submit senior manager approval applications in urgent or temporary scenarios, additional time to notify changes to Statements of Responsibilities, longer validity periods for criminal record checks used in applications, and more time to update the FCA Directory. These adjustments should make succession planning and interim arrangements considerably easier to manage.
Annual fit and proper assessments will be streamlined too. While full detail will arrive in forthcoming guidance, the regulators have confirmed plans to reduce duplication and evidential burden within annual certification, a change likely to be welcomed by firms with large certified populations where the annual cycle is resource-intensive.
Crucially, this is the start of a longer journey. The government has already signalled it is weighing legislative changes that could reshape the Certification Regime and cut the number of Senior Management Functions requiring regulatory approval, with further consultation expected later in 2026.
In the near term, firms should assess whether their Enhanced or Core classification may change, gauge the impact of the reduced certification scope, identify opportunities to streamline annual certification, and update internal SMCR procedures and governance documentation. Though the immediate changes are incremental, they point clearly towards a more proportionate SMCR framework, and firms should treat this as the opening move in a phased programme rather than a one-off regulatory update.
Read the full RiskSmart post here.
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