PRA has published a report that evaluates the SMCR and whether it has met its aims. In principle, it concludes that it has – it has helped ensure that senior individuals in firms take greater responsibility for their actions, and has made it easier for both firms and the PRA to hold individuals to account. PRA is also pleased that 95% of the firms it surveyed said the regime was having a positive effect on individual behaviour.
The evaluation looked at:
- holding individuals to account
- myth-busting and clarifying expectations and
- application to different business models
PRA has identified 9 follow up actions that will help it to refine how the regime works in practice.
- possibly to clarify expectations on misconduct reporting in notifications and regulatory references, and generally to engage more with industry to ensure regulatory references are used appropriately
- consider a further articulation of the link between the SMCR and remuneration adjustments
- better underlining of responsibilities by ensuring the quality of SoRs
- reaffirming the need for diverse skills and experience within firms
- considering whether board responsibilities and individual accountability is mutually reinforcing
- clarifying regulatory expectations where a senior manager takes temporary long-term leave
- considering various aspects of allocation of responsibilities, including why the SMF6 (head of key business area) is used less by banks than insurers, how Key Function Holder designation works alongside the SMCR, the need for further guidance on allocating Prescribed Responsibilities and whether smaller firms should need to submit SMCR documentation less frequently and
- possible guidance on expectations for new senior managers
PRA welcomes comments on the report by 26 February, and will then consult FCA and Treasury to decide whether there is a case for consulting on any formal changes.