Accountability in UK Financial Services: Industry Perceptions on the Success of the Senior Managers and Certification Regime

In the wake of the 2007-2009 financial crisis, public trust in financial institutions hit an all-time low. There was widespread frustration that, despite the scale of the crisis, few senior executives were held personally accountable. As part of the response to this, the Senior Managers and Certification Regime (SMCR) was introduced in 2016, designed to bring greater accountability to senior executives in financial institutions and improve overall industry conduct.

Today the industry faces a balancing act between maintaining accountability and reducing administrative burdens. Concerns about administrative burdens were raised in the government’s Edinburgh Reforms, aimed at fostering industry competitiveness. In November 2024, the Chancellor of the Exchequer, in her first Mansion House speech stated that HM Treasury and the financial services regulators were currently undertaking a review of the SMCR. Our own review of the SMCR is thus very timely.

Eight years after its introduction, we explore insider perceptions about the effectiveness of the SMCR and draw comparisons with similar regimes around the globe. Through interviews with senior industry insiders our article provides insights into the successes and challenges of the SMCR while exploring its future relevance in today’s regulatory landscape. We talked to our interviewees about how the SMCR has fared since its inception, focusing on core topics including culture, enforcement, regulatory references and talent acquisition and retention.

Mixed Views on Culture and Professionalism

Culture was one of the core concerns with the banking industry that the SMCR sought to tackle. We asked our interviewees about their perception of its success on this issue. Several interviewees recognised the value in the SMCR’s emphasis on individual accountability, noting that the regime has fostered a more conscientious approach to decision-making. Some interviewees observed that there had been an increase in professionalism and clearer documentation of decision-making processes. These changes can contribute to more structured and transparent governance within firms.

But there were also criticisms. Some interviewees found that the SMCR inadvertently encourages ‘defensive’ behaviour, where managers feel compelled to ‘lawyer up’ or avoid risk, fearing potential personal liability. It is thought by some that this ‘cover your back’ mentality can limit innovation and foster a culture where individuals become overly cautious. Moreover, some view the SMCR as a burdensome, process-heavy regulation that stifles the agility and creativity needed in today’s dynamic business environment.

Enforcement

One area that has generated considerable debate is the low level of formal enforcement action under the SMCR. It has been argued that the lack of publicised enforcement actions undermine the regime’s effectiveness. In contrast, some experts note that enforcement metrics alone should not measure success. Instead, they argue that the primary objective of such a regime can be preventive—to cultivate an environment where accountability is ingrained, and major issues are addressed before they escalate. Interviewees were split in their opinion on whether the lack of enforcement was indicative of a failure to ensure the SMCRs effectiveness.

Interviewees also noted differences in how the UK’s Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) approach supervision. While the PRA was described as more consistently engaged, there were criticisms about the FCA for understaffing and a lack of expertise alongside a perception of rapid staff turnover. This falls in line with a recent report on the regulator’s failure. Inconsistency of regulator engagement has the potential to dilute the overall impact of the SMCR.

The Regulatory Reference Requirement

Another contentious aspect of the SMCR is the requirement for regulatory references when appointing senior staff. This mechanism is intended to prevent the practice of ‘rolling bad apples’, where problematic individuals move between organisations without accountability. While this requirement is valuable for upholding standards, it has its complications.

Interviewees, particularly those with legal expertise, highlighted concerns around potential litigation arising from negative references. Firms can face legal challenges from employees who dispute unfavourable comments in their regulatory references, leading to overly cautious reference-writing or, conversely, non-committal, vague endorsements. This delicate balancing act between transparency and risk mitigation illustrates the complexity of achieving the SMCR’s objectives.

Talent Acquisition and Retention Challenges

A further implication of the SMCR is its impact on recruitment and retention in senior roles. While some interviewees reported that candidates can be deterred by the personal accountability imposed by the SMCR, particularly in non-executive director (NED) roles, we were surprised to note the general perception was that the regime has had little impact on recruitment and retention. Reports of candidates requiring ‘danger money’ for appointment to senior roles in financial firms were not supported by our interviewees.

However, regulatory delays in certifying senior managers have caused operational challenges. Candidates from outside the UK or from less regulated industries often face lengthy approval processes, which can disrupt succession planning and leave firms vulnerable to gaps in leadership.

Global Influence: How Other Jurisdictions are Adopting Similar Measures

The SMCR’s framework has influenced similar accountability regimes globally, with countries like Ireland, Australia, and Singapore adapting versions suited to their regulatory landscapes. In Ireland, the Individual Accountability Framework closely mirrors the SMCR but expands its reach to include all non-executive directors. In Australia, the Banking Executive Accountability Regime (BEAR), now the Financial Accountability Regime (FAR), has shown some success in encouraging cultural shifts, though it has faced similar criticisms around administrative burden and fear-driven behaviours. Singapore’s approach, meanwhile, is less prescriptive and lacks formal enforcement mechanisms, reflecting a more hands-off style.

Looking Forward: Strengthening the SMCR’s Impact

As the UK’s financial regulators review the SMCR, a core question emerges: how to maintain accountability without stifling industry innovation or overburdening firms with administrative tasks. A key takeaway from this research is the importance of a balanced approach, where the SMCR serves as a foundation for cultural change while allowing firms some flexibility in its application.

One potential area for improvement is clarifying regulatory reference requirements to reduce ambiguity and litigation risks. Similarly, fostering a more collaborative relationship between firms and regulators could enhance the SMCR’s effectiveness by building a culture of open communication and shared responsibility.

Ultimately, the SMCR’s legacy hinges on its ability to rebuild and sustain trust in the banking sector while encouraging a culture that balances risk with accountability. The regime has succeeded in instilling greater responsibility among senior managers, but the ongoing debate around enforcement, cultural impacts, and talent retention suggests there is room for refinement.

The authors’ paper, ‘The Senior Managers and Certification Regime in UK Practice and Global Context’, can be found here.

Dr Eleanore Hickman is a Senior Lecturer in Law at the University of Bristol Law School.

Dr Alan Brener is an Associate Professor at University College London, Faculty of Law.