SM&CR Reform: What Fewer Certified Roles Mean For Accountability And AI Sign-Off

£2bn - Expected saving for firms over ten years (PRA and FCA, 22 October 2026)  ·  139,000 - Individuals below senior manager level who would leave the Certification Regime (PRA and FCA, 22 October 2026)  ·  43% - Expected fall in PRA SM&CR pre-approvals under the proposals (PRA, 22 October 2026)  ·  22 Jan - Closing date for the consultations, with policy expected in 2027

SM&CR reform is what the PRA and FCA call the second and most significant phase of changes to the regime, which began ten years ago. The PRA and FCA announced parallel consultations on 22 October 2026, during the Mansion House speeches by Katharine Braddick and Nikhil Rathi. The regulators say high standards of individual accountability and conduct will remain unchanged, while unnecessary burdens are removed.

For firms that use AI in operations, the reform shifts record-keeping from the regulator's register to the firm. That is a reason to tighten how you document ownership and sign-off, especially where an AI agent prepares the work.

What is changing in the SM&CR reform?

• **Certification Regime removed.** Around 139,000 individuals below senior manager level would no longer need annual certification checks or appear on the Financial Services Register.
• **Some pre-approvals become notifications.** Regulator pre-approval would be removed for roles including Chief Actuaries and Chairs of Risk and Audit Committees. Firms would notify the regulators and remain responsible for checking candidates are fit and proper.
• **Conduct rules more targeted.** The breach reporting threshold rises for most staff below senior manager level, and Conduct Rule training is simplified.
• **Key roles unchanged.** CEOs, CFOs and Chairs still need pre-approval, including fit and proper tests. Regulators can require pre-approval for otherwise notified roles in high-risk cases.

The PRA expects its SM&CR pre-approvals to fall by 43% and the overall burden of its regime to halve. For FCA Enhanced solo-regulated firms, around 15% of applications would move to notification and two senior manager functions would be removed, saving a further 19%, according to the announcement.

What did the regulators say?

Katharine Braddick, Deputy Governor for Prudential Regulation and Chief Executive of the PRA, said: “The Senior Managers Regime is an essential part of the UK's regulatory framework.” Sarah Pritchard, Deputy Chief Executive of the FCA, said: “SM&CR has delivered significant improvements in accountability and governance across financial services.”

The consultations are open until 22 January, with policy expected to follow in 2027. Some reforms need legislation, and the regulators say consulting now lets them implement quickly once it passes. A week later, on 29 October 2026, the government published a Regulators Council letter commissioning a new programme of work on regulator effectiveness and reform.

What does SM&CR reform mean for AI governance?

The announcement does not mention AI. Our reading is that the reform makes internal records more important. Today the Certification Regime and the register give a formal trail for many people below senior manager level. If that trail goes, the evidence of who did what sits in the firm's own systems.

• **Name an owner for every AI-assisted workflow.** Link each agent to the senior manager whose responsibilities cover it.
• **Record every sign-off.** Who approved the reconciliation, the client email or the report, when, and on what evidence.
• **Keep training records you can show.** Simpler Conduct Rule training still needs to reach the people who review AI output.
• **Check your responsibilities map.** As roles move from pre-approval to notification, make sure AI oversight is written into the right one.

How does sign-off work when an AI agent prepares the work?

Our line is “The agent prepares. A person approves.” On a daily mismatch report, the agent lists each real difference with the likely cause and the evidence beside it. A named person approves each fix, and nothing changes in your systems until they do. Every approval is recorded with the reviewer's name and the time, which is the kind of trail a firm will want if the formal register shrinks. Our explainer on human in the loop AI covers what makes that review meaningful.

What should firms do before the consultation closes?

Read both consultations and decide whether to respond by 22 January. List the AI tools and agents in use, map each to a senior manager, and check that every approval is recorded. Our article on AI regulation in the UK covers the wider government agenda. Our AI Agency London team builds the approval trail into every agent, and a 14-day Proof Run shows it on one of your workflows. This article summarises public proposals and is not legal or regulatory advice.