Financial Market Infrastructures – a new era of responsibility for individuals

United Kingdom

HMT has announced that it intends to proceed with its new Senior Managers & Certification Regime (SM&CR) for financial market infrastructures (FMIs).  The new regime will be similar to the SM&CR for other regulated financial services firms, and will introduce a new era of personal responsibility for individuals within FMIs.


FMIs underpin the functioning and stability of the entire UK financial system with a large concentration of risk. Against this backdrop, HMT wishes to introduce a SM&CR for FMIs in order to strengthen individual accountability for senior management, promote high conduct standards amongst all staff, and ensure good governance standards more generally.

The FMIs covered by HMT’s consultation were:

  • central counterparties (CCPs);
  • central securities depositories (CSDs);
  • payment systems recognised under the Banking Act 2009 (recognised payment systems) and specific service providers to such payment systems.

The proposals included a senior managers regime which would allow the Bank of England (BoE) to determine the suitability of key individuals and impose a duty for senior managers to take reasonable steps to prevent or stop regulatory breaches. Under the proposed certification regime FMIs would be required to certify relevant staff as fit and proper. The BoE would also have powers to take enforcement action for misconduct. We discussed HMT’s consultation in more detail in our previous article.

Responses to the consultation

HMT received a total of 13 responses, the majority of which were broadly supportive. Most respondents agreed with the regime in principle, and indeed some respondents said they have already voluntarily introduced arrangements for senior personnel which replicate elements of the SM&CR. 

Amongst the regime’s critics, however, were those that felt a SM&CR would be inappropriate because FMIs are fundamentally different in nature to other regulated financial services firms, and in particular that individuals within FMIs are not incentivised to take risks in the way they may be in other sectors. Some argued that HMT’s aims are already adequately implemented by the existing legal and regulatory framework, and others felt the regime would be too costly, disruptive and time consuming for both firms and the BoE.

Respondents also noted the international nature of FMIs and raised concerns that a SM&CR may make the UK a less attractive jurisdiction for talented staff and damage the UK’s competitive position as an international centre for clearing and post-trade services.

Some respondents called for any regime to be proportionate and tailored to FMIs and said they would welcome further details on the scope, application, supervision and enforcement arrangements.

HMT’s response

HMT has confirmed its intention to introduce the SM&CR and reiterated its belief that the current regime does not allow for sufficient oversight of individual conduct.

Although HMT intends the regime to be relatively uniform in terms of powers and regulatory approach, it does acknowledge that FMIs differ in nature from other regulated firms and from one another; it therefore considers it crucial that the SM&CR is tailored to each different type of firm.

CCPs and CSDs

HMT plans to proceed with an SM&CR for CCPs and CSDs, and also wants the option to extend this to credit rating agencies and recognised investment exchanges in future, given that they are systemic entities.

It intends to legislate to create a new SM&CR ‘gateway’, which would allow HMT to lay statutory instruments which would form the basis of sector-specific rules by the relevant regulator. The detail of the regime will be introduced through BoE rules. This, HMT considers, will allow for different requirements across different types of FMI, and any new BoE rules will be subject to consultation.

Recognised payment systems and specified service providers

HMT also intends to legislate to implement an SM&CR for recognised payment systems and specified service providers, but in light of the forthcoming review of the regulatory perimeter for systemic firms in payments chains regulated by the BoE, this will be taken forward separately and to a “different, longer timeframe”.

Next steps

HMT has no plans for any further consultations on the frameworks for the SM&CR and will provide further details of its plans for CCPs and CSDs “in due course”.


FMIs will be hoping for a nuanced approach, but exactly how the regime will look for different types of FMI is not yet clear. The gateway legislation will be introduced “when parliamentary time allows”, and it will then need to be followed by secondary legislation and BoE rules. The new regime is therefore likely to be some way off. HMT is, however, clear that there must be an increase in personal accountability.