SM&CR is Coming to Town

Posted on: 1 December 2021

Written by: John Burns

Payment Institutions and EMIs who are clients of Cosegic will have heard James Borley and myself say many times over the past couple of years that, while the Senior Managers & Certification Regime (SM&CR) doesn’t apply to firms in the sector, it is best practice to act as if it does.  We may also have said (frequently) that it was likely to be extended to our sector at some point in the not too distant near future.

Our view on this has been further reinforced by the hugely increased focus that the FCA has had in the sector and the creation of the specialist Payments Supervision Department at the regulator. In particular, the FCA’s comment in their Dear CEO letter of 9 July 2020 that “a root cause of many APIs’ and EMI’s regulatory issues is inadequate governance and oversight”.

This was followed up on 21 October 2021, in the FCA‘s Annual Perimeter Report for 2020-21 (Perimeter Report 2020/21 (, which contained the first formal acknowledgment from the FCA;

“However, the SM&CR does not currently apply universally. For example, it does not apply to Recognised Investment Exchanges (RIEs), Credit Ratings Agencies (CRAs) or payments and e-money firms. ….Extending the SM&CR to the payments and e-money sector would enhance individual accountability and governance within firms, and strengthen our ability to supervise such firms by giving us a wider range of tools to drive higher standards and mitigate risks of consumer harm….”

"… As outlined above, we see value in extending the SM&CR to these firms, and will continue to work with the Treasury on this issue.”

The extension of SM&CR to our sector could be implemented by means of an FCA instrument or, as has been suggested by incorporating the Payment Services Regulations (PSRs) and E-Money Regulations (EMRs) into FSMA, which would require additional legislation, and would likely take some time, both to find parliamentary time for it and to get it drafted and passed. Having worked on legislation with HM treasury before, I can attest to how time-consuming and difficult that is.  However, one of the difficulties of the current PSRs and EMRs is that the FCA has no ability to grant a waiver, even when it would be sensible to do so – under FSMA they would have such power.

Although the actual implementation of any change, and thus the application of SM&CR may be some way off yet, firms who act as if it applies will find it less painful and costly when it is introduced, and will be able to evidence that they are addressing the governance issues identified by the FCA in their Dear CEO letter.

If you would like to discuss how we could help your firm get prepared, please contact James Borley or me.

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John B

John Burns

John is one of the UK’s foremost compliance experts in payment services, and he is Senior Advisor in our Payment Services Practice.

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