Change is the only constant, they say, and in the ever-evolving landscape of financial regulations, this statement holds true. The Senior Managers & Certification Regime (SM&CR), a cornerstone of the financial industry's governance framework, is undergoing a comprehensive review that promises to reshape its reach and influence. The future trajectory of this regime has garnered attention, particularly in relation to payments, following the broader review. In this blog, we delve into the implications and expectations tied to this transformation.
The seeds of transformation were sown when the government, in line with the Edinburgh Reforms of December 2022, announced its commitment to undertake a review of the SM&CR. This regime, designed to enhance accountability, transparency, and ethical behaviour in the financial industry, has been a focal point since its inception. Now, it is poised for evolution, prompted by the rapidly changing financial landscape and the need to align with emerging challenges and opportunities.
As part of this transformation journey, a call for evidence on the current SM&CR legislative framework was initiated by the government in March 2023. This call was accompanied by a thought-provoking joint discussion paper from the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), the regulatory bodies responsible for overseeing the financial industry. The discussions sparked by these initiatives have been pivotal in shaping the discourse around the future of SM&CR.
These dialogues weren't limited to the regulatory bodies and government. Industry stakeholders were also invited to share their perspectives on extending the SM&CR to recognized systemic payments entities, as well as authorized Payment Service Providers (PSPs) and Electronic Money Institutions (EMIs). This outreach was part of a broader consultation focusing on payments regulation and the systemic perimeter.
The response to this consultation underlines the significance of these proposed extensions to the regulatory landscape. The engagement of multiple stakeholders reflects the interconnectedness of the financial ecosystem and the importance of ensuring the efficacy of these regulations.
Central to this discourse is the understanding that the proposed extensions to the SM&CR will have ripple effects on the payment progression ecosystem. Recognized systemic payments entities, PSPs, and EMIs play pivotal roles in facilitating financial transactions in today's digital economy. The inclusion of these entities within the ambit of the SM&CR would undoubtedly reshape how they operate, interact, and adhere to regulatory standards.
However, the true depth of these effects will only be comprehensible once the broader SM&CR review concludes. The responses to the call for evidence, the deliberations around the discussion paper, and the industry's views on the proposed extensions will collectively pave the way forward. The Treasury's commitment to align these insights with regulatory authorities' recommendations underscores the collaborative nature of this transformation.
As we await the Treasury's announcement of next steps "in due course," the financial industry stands at the threshold of change. The evolving SM&CR landscape exemplifies the ongoing efforts to balance innovation, stability, and accountability. The regulatory framework must adapt to new technologies, business models, and risks without compromising the integrity of the financial system.
In conclusion, the journey of the Senior Managers & Certification Regime is a testament to the adaptability of the financial industry. The ongoing review, encompassing consultations, discussions, and considerations, holds the potential to shape the industry's trajectory for years to come. As we look forward to the Treasury's next move, it is clear that these changes will echo far beyond the realm of regulations, impacting how payments are progressed and financial services are delivered in the modern era.
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