PRA publishes Phase 1 SM&CR reforms: What firms need to know now

The PRA has extended the SMF7 (Group Entity Senior Manager) function to capture controllers and, where appropriate, their nominated representatives who exercise significant influence over the day-to-day management of a PRA-authorised firm, with the Rulebook amended so that the function can be performed by an employee or officer of a parent or group entity. The finalised guidance clarifies that the policy intent is to capture those individuals with responsibility for implementing the strategy, or who may otherwise be able to affect the safety and soundness of the UK-regulated firm's activities, rather than broader group-wide strategy setting.

The PRA does not require SMF7 designation for overseas individuals whose UK responsibilities are limited to developing overall group strategy; the focus is on those implementing strategy in UK firms or otherwise capable of affecting safety and soundness. Where a group or parent individual, including those based overseas is directly responsible for decisions about how a UK firm conducts its UK-regulated activities and has not delegated those decisions to a UK-based Senior Manager, SMF7 approval is likely required; firms should assess this by reference to their organisational structure, the split of responsibilities, and the scope of delegation to UK SMFs.

The PRA has confirmed that Senior Manager Conduct Rules now expressly apply to individuals performing an SMF role on an interim basis under the 12-week rule, without requiring formal approval, and breaches by such individuals must be reported via Form L — not Form C or Form D, which remain for holders of approved SMF positions. The amended rule also requires firms to submit a complete SMF application within 12 weeks of the absence occurring, rather than requiring submission, review, and determination all within that window; regulators retain a further statutory three months to review and determine the application.

The PRA has extended the validity period for CRCs from three months to six months prior to submission, and has introduced an exemption from the requirement to obtain a new CRC where an existing approved SMF holder applies for an SMF role within the same group, provided the gap between roles does not exceed one month. However, the PRA's system changes to reflect the new CRC validity period in Form A and Form E will not go live until 10 July 2026, notwithstanding the 24 April 2026 legal effectiveness, meaning firms must manage this gap operationally for approximately 11 weeks.

Updated Statements of Responsibilities (SoRs) and Management Responsibilities Maps (MRMs) must be submitted to the PRA no later than six months following a significant change in responsibilities, with internal records updated as soon as practicable; where multiple significant changes occur during a single submission window, firms need only submit the latest version. The PRA has retained the requirement that SoRs and MRMs be maintained "at all times", consistent with FCA wording, as defining parameters for "up to date" would add complexity for little value.

Where an internal misconduct investigation was commenced but disciplinary measures were not concluded because the individual left before the process completed, firms should consider whether to include details of the investigation in the regulatory reference, though this guidance does not encourage breach of employment law, and firms are not required to disclose information that has not been properly verified. Incomplete investigations may be included in the "all relevant information" section of a regulatory reference, but references must be true, accurate, fair, and based on documented fact, they must not be based on unproven allegations or mere suspicions.

The PRA has clarified that it has no set expectations for the form or procedures used for annual certification assessments, firms can build on existing internal systems and processes, but must clearly record that the individual is fit and proper and the aspects of the firm's affairs in which the person will be involved, and must allocate Prescribed Responsibility B (the firm's obligations under the Certification Regime) to an accountable SMF holder. Planned FCA system changes will also remove duplicate FCA material risk taker (MRT) roles where an individual at a dual-regulated firm is also certified by the PRA in one of its certification functions at the same firm, reducing operational burden.

The booking-arrangements expectations in SS5/21 apply to both international banks and UK trading banks, and firms must inform and engage with the PRA ahead of any material booking changes, particularly those that increase fragmentation or reduce the effectiveness of risk management, with the PRA able to impose conditions or restrictions where it is not satisfied with a proposed change. For systemic wholesale branches specifically, where a head office or group individual exercises significant influence over branch booking arrangements or relevant group systems or operations on which the branch relies, the PRA expects that individual to apply for SMF7 approval.

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The PRA has confirmed that resolution administrators appointed by the Bank of England, and similar officials appointed by the Bank of England or HM Treasury to manage or oversee a bank or building society in stressed conditions, are exempted from the SM&CR. Equivalent exclusions have been added to the Certification Part for resolution administrators and Bank of England/HM Treasury appointments connected with stabilisation options or powers.

Subject to legislative timings, the PRA will consult on Phase 2 reforms, including reducing SMF pre-approval requirements, reviewing SoR requirements, and removal of the Certification Regime from FSMA entirely. HM Treasury has also consulted on the introduction of a notification-only process for certain senior management functions; if taken forward, the PRA will consider whether such a notification approach is appropriate for certain SMF appointments, which may include some or all of the SMF7 population.

As of March 2026, in the period December 2025 to February 2026, 100% of SMF applications were determined within the three-month deadline, and 98% were determined within a two-month target. In July 2025, the PRA's chief executive announced a new target to complete at least 50% of SMF applications within 45 days; in the period December 2025 to February 2026, 85% of applications were completed within this 45-day target.