An HM Treasury-led review into the Senior Managers & Certification Regime beginning in the first quarter of 2023 has been announced as part of substantial overhaul of financial services regulations.
The move was announced by chancellor Jeremy Hunt as part of his Edinburgh Reforms which include a loosening of safeguards in the sector, including the ring-fencing of banks, and orders for regulators to be more focused on growth and international competitiveness.
In a ministerial statement, Hunt (pictured) said: “The government and regulators will separately commence a review of the Senior Managers & Certification Regime in Q1 2023.
“The government will launch a call for evidence to look at the legislative framework of the regime, and the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) will review the regulatory framework.
“The government’s call for evidence will be an information gathering exercise to garner views on the regime’s effectiveness, scope and proportionality, and to seek views on potential improvements and reforms.”
Hunt also committed to working with the FCA to examine the boundary between regulated financial advice and financial guidance – a process which has already begun with FCA focus groups.
The ring-fencing regime for banks
The rules around the ring-fencing of banks’ capital funds were introduced after the financial crisis of the late 2000s which led to the collapse of several major banks, required vast bailouts from taxpayers and triggered an economic recession.
HM Treasury said the PRA now intends to consult on removing rules for the capital deduction of certain non-performing exposures (NPEs) held by banks.
“This would allow the PRA to apply a judgement-led approach to address the adequacy of firms’ provisioning for NPEs, help to simplify the UK rulebook and avoid the unnecessary gold plating of prudential standards,” Hunt said.
“Such an approach would be possible only because of our regulatory freedoms outside the EU.”
PRA and FCA told to focus on growth and competitiveness
Regulators are being given stricter instructions to follow government economic policies and take these into account where relevant and practical when considering their principles and conducting relevant duties.
“The government is legislating through the Financial Services and Markets (FSM) Bill to introduce new secondary objectives for the FCA and PRA to provide for a greater focus on growth and international competitiveness while maintaining their existing primary objectives,” Hunt said.
“To further support this aim, I will today lay before Parliament new remit letters for the FCA and the PRA which will set clear, targeted recommendations for how the regulators should have regard to the government’s economic policy.”
The full list of government reforms is:
- Reforming the Ring-Fencing Regime for Banks
- Issuing new remit letters for the PRA and FCA with clear, targeted recommendations on growth and international competitiveness
- Publishing the plan for repealing and reforming EU law using powers within the FSM Bill, building a smarter regulatory framework for the UK
- Overhauling the UK’s regulation of prospectuses
- Reforming the Securitisation Regulation
- Repealing the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, and consulting on a new direction for retail disclosure
- Intending to repeal EU legislation on the European Long-Term Investment Fund (ELTIF), reflecting that the new UK Long-Term Asset Fund (LTAF) provides a better fund structure for the UK market
- Launching a Call for Evidence on reforming the Short Selling Regulation
- Publishing a draft Statutory Instrument to demonstrate how the new powers being taken forward in the FSM Bill will be used to ensure that the FCA has sufficient rulemaking powers over its retained EU payments legislation
- Consulting on removing burdensome customer information requirements set out in the Payment Accounts Regulations 2015
- Welcoming the PRA consultation on removing rules for the capital deduction of certain non-performing exposures held by banks
- Bringing forward secondary legislation to implement Wholesale Markets Review reforms
- Establishing an Accelerated Settlement Taskforce
- Committing to establish the independent Investment Research Review
- Commencing a review into reforming the Senior Managers & Certification Regime in Q1 2023
- Committing to having a regime for a UK consolidated tape in place by 2024
- Consulting, in early 2023 on issuing new guidance on Local Government Pension Scheme asset pooling
- Increasing the pace of consolidation in Defined Contribution pension schemes
- From April 2023, improving the tax rules for Real Estate Investment Trusts
- Announcing changes to the Building Societies Act 1986
- Delivering the outcomes of the Secondary Capital Raising Review
- Consulting on reform to the VAT treatment of fund management