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FCA - Senior Managers Regime - Presumption of Responsibility

Response to the consultation

We would like to use the opportunity of this to welcome the efforts that the FCA has made, in conjunction with the PRA, to ensure that the Senior Managers Regime (SMR) is proportionate for small deposit-takers, such as credit unions.  In particular we are strongly supportive of the proposed simplified regime for credit unions under a certain threshold.  This will alleviate the majority of our members’ concerns in relation to the implications of the SMR for the recruitment and retention of volunteer board members and senior staff.  The revised regime’s flexibility also provides for those (typically larger) firms which have a more complex and intricate governance and management structure to apply the regime more fully.  This flexibility provides a much superior regime for credit unions.

In this connection, however, we do have a query in respect of the simplified statements of responsibility which the FCA’s feedback statement references.  Since the PRA has revised upwards its starting threshold for the its simplified regime to £250 million total assets, we wonder whether the FCA’s intention is to align its simplified statement of responsibility / responsibility map requirement with this threshold as is suggested might be the case in the feedback statement.  This would make sense to us in order to ensure a consistent application of the regime between the two regulators and we hope that the FCA will do so.

In terms of the additional guidance which the consultation provides in draft in respect of the application of the presumption of responsibility we are broadly satisfied that the guidance provides the clarity that credit unions require to understand how the presumption will be applied in practice.  We would, however, use this opportunity to stress that we feel that it is very important that the expectations of SMRs under the presumption are proportionate and appropriate to both the circumstances and consequences of the breach and the size, nature and capacity of the firm in question, particularly in view of the more limited scope for consumer detriment posed by smaller firms.  For example, where there is an expectation that independent expert advice is sought, consideration should be given to the fact that a smaller firm may have more limited access to resource for such advice but that, if advice is not sought due to such constraints, this may be accommodated due to the more-limited scope for detriment arising from it.   We understand that this is implied in various references within the guidance but a more-explicit clarification would be welcome.

The full document is available to download on the right hand side