Women in Financial Services
The Challenges of the Senior Managers’ Regime
Rhian Bowler / 10 Nov 2017
E2W Regulation Business Team Meeting
The Challenges of the Senior Managers’ Regime
1st November 2017
On 1st November, E2W hosted a very successful meeting of the E2W Regulation Team, alongside Jackie O’Connor, Head of EMEA Regulatory Reform at Goldman Sachs and Cosette Reczek, Executive Leader & Management Consultant, of Permuto Consulting who led an engaging round table discussion on “How are we managing the new Senior Managers’ Regime (SMR) and embedding the ‘reasonable steps’”?
Background
The Senior Managers’ Regime is part of UK regulation, introduced by the Financial Conduct Authority in 2016 with the aim of increasing the accountability of senior members of staff in financial institutions with operations in the UK.
The SMR requires firms to allocate prescribed responsibilities to certain senior individuals and to vet their fitness, propriety and conduct on a regular basis. These senior members of staff need to take ‘reasonable steps’ to ensure that rules and regulations are not contravened.
The Regime is already live for banks and insurance companies, with investment firms, asset management firms and the remainder of UK financial services companies to comply in the future.
There is much for us to focus on, here and now.
The group discussed how the reasonable steps framework for managers is being defined and how the steps have been, or might be, implemented within organisations. The difficulty in defining the steps was a common issue and the group asked “To what extent should we define the ‘reasonable steps’? Should it be mandated? Set in policy?”
You must run your company in a ‘controlled manner’ was the regulator’s starting point!
Everyone agreed that the guidelines given to banks were vague, and it has, therefore, been an evolving process, uncovering issues along the way.
The balance between complying with the regulation and being able to perform daily functions has created problems. Some companies initiated new, onerous processes as a result of the regulation which weren’t practical on a daily basis. This has led to managers having to take a step back and think about their functions and what they’re trying to achieve.
Another common theme was the struggle to achieve consistency in ‘steps’ across groups and structures. One company has set up internal control groups to compare business areas in an effort to establish the same methods of capturing data, meeting outputs and gathering & storing information.
Part of the SMR is storing records of meetings and conversations – a lot of data. Companies are creating internal tools to facilitate this as the data from meetings and the like need to be stored in multiple places.
The attendees shared the successes and challenges that they’re facing: companies are realising that email conversations make recording interactions easier, especially when speaking with people in different geographical locations; small teams in an office might forget to document their conversations, not realising that it could be important.
All in all, the group agreed that creating a controlled environment is critical to complying with the SMR successfully. The development of reasonable steps is an evolving process for companies and the regulators themselves.
Due to high demand and interest we are organising an ‘SMR Primer’ event at UBS on 24th January 2018 5.30 – 6.30pm. More information will be released to members shortly. Sign up for membership to receive your priority invitation.
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