Financial watchdogs have proposed removing annual certification checks for around 139,000 financial services employees in reforms expected to save the industry £2 billion over ten years. Regulators insist accountability will remain intact, but the removal of mandatory checks, regulatory references and a public directory raises questions about transparency and consumer protection.
UK financial regulators have proposed removing mandatory annual certification checks for approximately 139,000 financial services employees, as part of a major overhaul of rules introduced following the 2008 financial crisis. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) say the reforms could save businesses around £2 billion over ten years, while maintaining standards of individual accountability and professional conduct.
The proposals, announced on Thursday 22 October, represent the most significant changes to the Senior Managers and Certification Regime (SM&CR) since its introduction in 2016.
The regime was established to address failures in responsibility and accountability exposed by the global financial crisis.
Its underlying principle was that individuals working in influential financial positions should be identifiable, appropriately assessed and accountable for their actions.
A decade later, regulators believe parts of the system have become unnecessarily expensive and administratively burdensome.
However, the proposed removal of several existing safeguards raises an important question: can the financial industry maintain the same level of accountability with fewer mandatory checks?
What are the regulators proposing?
The reforms would fundamentally alter how financial institutions assess and report on employees working in certain regulated positions.
Currently, firms must formally assess the fitness and propriety of employees performing specified certification functions when they are appointed and at least annually thereafter.
These assessments consider whether individuals are suitable to carry out their responsibilities, including their competence, honesty and integrity.
Under the proposals, the mandatory Certification Regime would be abolished.
Approximately 139,000 employees below senior management level would no longer be subject to its formal certification requirements.
Instead, financial institutions would continue assessing staff suitability under broader existing regulatory obligations.
Other significant changes include:
- Reduced senior management approvals: Several senior roles, including chief actuaries and chairs of risk and audit committees, would no longer require advance regulatory approval. Firms would notify regulators of appointments instead.
- Removal of mandatory regulatory references: Employers would no longer be required to obtain the specific regulatory references currently required for certified employees.
- Reduced misconduct reporting: For most employees below senior management level, reporting thresholds would rise, meaning some less serious disciplinary outcomes would no longer need to be reported to regulators.
- Closure of a public directory: The FCA proposes retiring its Directory of certified and assessed persons, which currently provides publicly accessible information about individuals working in specified financial services roles.
- Simplified conduct training: Firms would have greater flexibility in how they ensure employees understand the rules governing their behaviour.
The changes would substantially reduce the paperwork, record-keeping and regulatory submissions required of financial institutions.
Why were the original rules introduced?
The SM&CR was introduced for banks in 2016 and subsequently extended across the financial services industry.
It followed widespread criticism of the conduct, governance and accountability failures exposed by the 2008 financial crisis.
One concern was the difficulty of establishing individual responsibility when problems occurred within large and complicated financial institutions.
The new framework sought to make responsibility clearer by identifying senior decision-makers, requiring assessments of suitability and establishing enforceable standards of professional conduct.
The Certification Regime extended formal suitability assessments to employees below senior management whose work could pose significant risks to customers, firms or financial markets.
Importantly, these checks are carried out by employers under regulatory requirements. They are not annual personal inspections conducted by the FCA or PRA.
The latest proposals would remove those specific mandatory certification assessments rather than abolish every obligation to check employees’ competence or suitability.
Regulators expect £2 billion in savings
The FCA and PRA argue that the existing system places unnecessary costs on businesses without producing equivalent benefits.
According to the Bank of England’s announcement, the reforms are expected to save financial firms approximately £2 billion over a decade.
Regulators believe businesses could redirect resources currently devoted to compliance administration towards recruitment, investment, innovation and improving customer outcomes.
They also argue that unnecessary approval procedures can delay appointments and make the UK less competitive internationally.
Katharine Braddick, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, defended the proposals, arguing that important senior roles would remain subject to regulatory checks while unnecessary administrative requirements would be reduced.
Sarah Pritchard, Deputy Chief Executive of the FCA, said the existing regime had delivered improvements in accountability and governance.
She maintained that a simpler system could preserve those benefits while making regulation more efficient.
What safeguards would remain?
Despite the proposed reductions, regulators emphasise that the changes would not remove individual accountability from the financial services industry.
Chief executives, chief financial officers and chairs would continue to require regulatory approval before taking up their posts.
Other senior roles moving to a notification system would still be subject to suitability assessments carried out by their employers.
Regulators would also retain powers to require advance approval for otherwise notified appointments in higher-risk circumstances.
Financial institutions would remain responsible for ensuring employees have the skills, competence and personal characteristics required for their positions.
Existing Conduct Rules would continue to apply, with regulators retaining enforcement powers in relevant cases.
In other words, financial misconduct would not become permissible simply because an employee was no longer subject to annual certification.
The principal change would be to the formal processes used to demonstrate suitability and report certain information.
Could removing regulatory references create additional risks?
One of the more significant elements of the proposals concerns regulatory references.
Under the existing system, firms recruiting employees into certification roles must obtain references designed to reveal relevant information about previous conduct and suitability.
These requirements help prospective employers identify issues that may not emerge through ordinary employment references.
The PRA acknowledges in its consultation document that removing the requirements carries risks.
In particular, firms might no longer receive the same level of detailed information about prospective employees that existing regulatory references provide.
However, the regulator concludes that the costs of the current requirements outweigh their benefits.
Employers would still be permitted to obtain references and undertake additional checks when appropriate.
Mandatory regulatory references would also remain for senior management roles covered by the relevant requirements.
The debate is therefore not whether employers should check candidates at all, but whether removing compulsory, standardised procedures could allow important information to be missed.
Public directory could also disappear
Another proposed change would affect the availability of information about individuals working in financial services.
The FCA currently maintains a Directory of certified and assessed persons, allowing members of the public and other interested parties to access information about people performing specified roles.
Under the reforms, that directory would be retired.
Information about authorised firms and relevant senior managers would remain available through the Financial Services Register.
The FCA also points to its Firm Checker service as a tool consumers can use to check whether a financial business is authorised or registered.
Nevertheless, removing the directory would reduce the amount of individual-level information available through an FCA-maintained public source.
For consumers seeking to verify the professional status of someone dealing with their finances, that distinction could matter.
The question is whether the remaining register and firm-checking facilities provide sufficient transparency.
A balance between economic growth and accountability
The reforms form part of a wider effort to make UK financial regulation more proportionate and support economic competitiveness.
Earlier changes to the SM&CR were introduced in April 2026, and the latest proposals would go considerably further.
The financial sector has legitimate reasons to question regulatory procedures that consume substantial resources without demonstrating clear additional benefits.
Equally, the original regime was created because failures of governance and accountability in financial institutions can have consequences well beyond the companies involved.
The regulators’ own assessments recognise that changing the system involves some risks, even while concluding that the reforms should deliver overall benefits.
The central issue is whether existing obligations on firms will provide sufficiently consistent safeguards without the formal certification and reference requirements.
It is also unclear how much of the projected industry savings, if any, would translate into direct benefits for customers.
The £2 billion figure represents estimated savings for financial firms, not a commitment to lower fees or other consumer savings.
When could the changes take effect?
The proposals are currently subject to consultation and have not become law or taken effect.
The FCA and PRA are seeking responses until 22 January 2027.
The FCA expects to publish final regulatory requirements during the first half of 2027, while implementation of significant elements depends on the Financial Services and Markets Bill 2026 and subsequent legislative arrangements.
The proposals could therefore be amended before implementation.
Businesses, consumer representatives and other interested parties can examine the proposals and submit responses through the FCA’s official consultation.
For the financial industry, the reforms promise lower compliance costs and faster recruitment. For regulators and consumers, the challenge will be ensuring that removing paperwork does not also remove safeguards whose value only becomes apparent when something goes wrong.
