FCA - CP 14/31 - Senior Managers Regime - forms, consequential and transitional aspects
Response to the consultation
We have made our concerns in relation to the Senior Managers Regime and its proposed application to credit unions – particularly by FCA – clear in our response to CP 14/13 last year. We continue to urge the FCA to mirror the PRA’s proposals in creating a simplified regime for smaller credit unions and to extend this to larger credit unions also.
That having been said, we limit our comments in this response to the proposals in CP 14/31 on the matters of forms, consequential and transitional aspects of the regime.
In general we are satisfied with the proposals as they are set out. We appreciate the intended grandfathering of existing Approved Persons to the new regime which will do a great deal to alleviate the concerns of our members in relation to the proposals. We do, however, have a number of concerns – some of which are related to the detailed comments already submitted to CP 14/13 but which have not been reflected in these proposals.
Firstly, in relation to the envisaged process for grandfathering, the system fails to recognise the concerns we raised in our earlier response in relation to the slightly unorthodox manner in which the existing Approved Persons Regime has been applied to credit unions. Under the guidance at CREDS 8.3.4 G credit unions are advised to have their board members approved under CF1, Director, and to have their supervisory committee members approved as CF2, Non-Executive Director. Now, while in some cases credit union directors would take a hands-on role in the management of the credit union day-to-day, this is increasingly being replaced – and in most credit unions already has been replaced – by a more-typical distinction between governance board and executive management whereby the whole of a credit union’s board would only perform NED functions. Therefore, in a credit union in excess of £25 million in assets a chairperson, for instance, who is currently approved as CF1 would need, under the new regime, to take the PRA SMF9, Chairperson. Similarly, a junior board member, also approved as CF1, would need to be authorised as Non-Executive Director, SMF15.
However, the grandfathering process as proposed only sets out the possibility of moving from a function currently considered to be executive to a senior management function which is also considered executive and vice versa for non-executive functions. For many credit unions this would preclude the possibility of taking up the grandfathering process and would require many – if not all – existing directors to apply for new authorisations. This cannot be fair since it occurs as the result of legacy guidance from the FSA which credit unions have followed for many years in good faith but which has not been taken account of under the proposals. We therefore urge both FCA and PRA to put in place special grandfathering arrangements for credit unions in order to allow applicants to cross from CF1, Director, to non-executive director functions.
The full response to the consultation response is available to download on the right hand side.