Featured Product

    PRA and FCA Issue Statement on SM&CR Expectations During COVID Crisis

    April 03, 2020

    PRA and FCA published a statement that sets out their joint approach to the Senior Managers and Certification Regime (SM&CR) for dual-regulated firms in light of the COVID-19 outbreak. The authorities have made specific provisions for firms in these circumstances and these relate to notification about changes to senior manager responsibilities, temporary arrangements for senior management functions, furloughing senior management functions, and certification requirements under SM&CR

    Where possible, the authorities have stated their intention to provide flexibility to FCA and PRA dual-regulated firms. The specific provisions include the following:

    • Notification about changes to Senior Manager responsibilities. The obligation on firms to update and resubmit a statements of responsibilities if there are significant changes to senior management functions responsibilities is set in statute. There is no fixed statutory deadline for firms to resubmit the revised statements in the event of such a significant change. The authorities understand that significant changes to senior management functions' responsibilities may be required in this period due to sickness or any other temporary situations as a result of COVID-19. Thus, the regulators expect firms to resubmit relevant statements of responsibilities as soon as reasonably practicable; the regulators understand that firms may take longer than usual to submit revised statements in the present environment.
    • Temporary arrangements for senior management functions. FCA’s and PRA’s rules allow individuals to perform senior management functions without approval for up to 12 weeks in a consecutive one-year period if their firm experiences a senior management vacancy that is temporary and/or reasonably unforeseen. This is sometimes referred to as the "12-week rule." FCA and PRA are gathering evidence on whether the 12-week rule is likely to give dual-regulated firms enough flexibility to deal with temporary absences of senior management functions as a result of COVID-19. If FCA and PRA conclude that the 12-week rule is insufficient to allow firms to respond to temporary senior management function absences linked to COVID-19, they will consider additional measures.
    • Allocating responsibility for coordinating firms’ responses to COVID-19 among senior management functions. FCA and PRA do not require or expect firms to designate a single senior management function to be responsible for all aspects of their response to COVID-19. While it is important for firms to have a clear framework for allocating responsibilities to various functions for different aspects of their response to COVID-19, FCA and PRA do not generally prescribe a "one-size-fits-all" approach. An exception is the identification of key workers, which firms should allocate to the CEO.
    • Furloughing senior management functions. If an individual performing one of the mandatory or required senior management functions becomes absent, the firm must appoint individuals to continue performing these functions so they can continue fulfilling their legal and regulatory obligations. If the replacement is temporary, firms can use the 12- week rule to arrange cover. Other functions are not mandatory under PRA and FCA rules. So firms have greater flexibility to furlough the individuals performing them. Unless a furloughed senior management function is permanently leaving their post, they will retain their approval during their absence and will not need to be re-approved when they return. So firms do not have to submit a Form C, unless a furloughed Senior Management Function employee steps down permanently or leaves the firm. Likewise, firms will not need to submit a Form J, which is normally required when a function goes on long-term leave, in respect of furloughed functions.
    • Certification requirements for dual regulated firms. Firms should continue to take reasonable steps to complete any annual certifications of employees that are due to expire while coronavirus restrictions are in place. Even in these circumstances, certified staff who are not fit and proper should not be re-certified. Certification is an important mechanism for firms to ensure that their critical people are fit and proper. 

     

    Related Links

    Keywords: Europe, UK, Banking, Insurance, Securities, SM&CR, COVID-19, Senior Management Functions, Dual Regulated Firms, Governance, ESG, FCA, PRA

    Featured Experts
    Related Articles
    News

    APRA Updates Timelines for Revision of Market Risk Standards

    The Australian Prudential Regulation Authority (APRA) released an update on the timelines for revisions to the market risk prudential standards and the implications for the broader capital framework.

    October 27, 2021 WebPage Regulatory News
    News

    BCBS and IOSCO Propose Further Policy Work on Margining Practices

    Three global standard-setters launched a joint consultation that reviews the margining practices during the COVID-19 pandemic and identifies potential areas for further policy work.

    October 26, 2021 WebPage Regulatory News
    News

    BoE Seeks Information Before Migrating Statistical Reporting to BEEDS

    The Bank of England (BoE) published the Statistical Notice 2021/09 requiring additional information from firms and software vendors to assist in the onboarding and testing phases for migrating statistical reporting to the BEEDS portal.

    October 25, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Alternative SA for Market Risk

    The European Banking Authority (EBA) published the final draft regulatory technical standards on gross jump-to-default amounts and on residual risk add-on under the Capital Requirements Regulation or CRR.

    October 25, 2021 WebPage Regulatory News
    News

    FCA Publishes Final Rules on Investment Firms Prudential Regime

    The Financial Conduct Authority (FCA) published the final rules on the Investment Firms Prudential Regime (IFPR) to streamline and simplify the prudential requirements for solo-regulated UK firms authorized under the Markets in Financial Instruments Directive (MiFID).

    October 25, 2021 WebPage Regulatory News
    News

    ESAs Propose New Rules for Taxonomy-Related Product Disclosures

    The European Supervisory Authorities (ESAs) have delivered to the European Commission (EC) the final report on the draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR).

    October 25, 2021 WebPage Regulatory News
    News

    EBA Advice on Review of Crisis Management/Deposit Insurance Framework

    The European Banking Authority (EBA) published an advice to the European Commission (EC) on funding in resolution and insolvency as part of the review of the crisis management and deposit insurance (CMDI) framework.

    October 25, 2021 WebPage Regulatory News
    News

    FSOC Report Issues Recommendations to Address Climate Risks

    The Financial Stability Oversight Council (FSOC) released a report in response to the U.S. President's Executive Order on climate-related financial risk.

    October 21, 2021 WebPage Regulatory News
    News

    BIS Paper Mulls Policies to Alleviate Challenges Posed by Big Techs

    The Bank for International Settlements (BIS) published a paper that examines the business models and the associated risks posed by big technology firms foraying into financial services sector.

    October 21, 2021 WebPage Regulatory News
    News

    BIS to Launch Asian Green Bond Fund Early Next Year

    The Bank for International Settlements (BIS) announced the development of an Asian Green Bond Fund, in collaboration with the development financing community, to channel global central bank reserves to green projects in Asia Pacific.

    October 21, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7609