UK financial regulators are proposing to scrap annual “certification” checks for roughly 139,000 finance workers, a move they say could save firms about £2 billion over the next decade. The proposal, announced by the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA), is part of a broader push to reduce compliance burdens and support economic growth.
Under the current system, introduced after the 2008 financial crisis, most staff in banks, insurers, and brokers must be formally re-approved each year to ensure they remain fit for their roles. The new plan would remove that annual requirement for most employees below senior management, while keeping stricter oversight for the most senior positions.
What is the Senior Managers and Certification Regime?
The rules in question are known as the Senior Managers and Certification Regime (SMCR). Created in the wake of the financial crisis, the SMCR was designed to make individuals personally accountable for misconduct and to ensure that firms could clearly identify who was responsible for key decisions. It applies to banks, building societies, insurers, and major investment firms regulated in the UK.
Under the current regime, staff in “certification” roles—such as those who handle client money or execute trades—must be assessed and re-certified at least once a year. The regulators now argue that this annual cycle is overly burdensome and does not always add meaningful protection for consumers or markets.
The proposal would end the annual re-certification for most of those roles. Instead, firms would only need to certify staff when they are hired or when they change roles. The most senior executives—including chief executives, chief financial officers, and chairs—would still require pre-approval from regulators before starting their jobs. For other roles, the process would shift to a simpler notification system, where firms inform regulators rather than waiting for sign-off.
The regulators also want to raise the bar for reporting minor conduct-rule breaches by non-senior staff. Currently, firms must report every breach, which can create a flood of low-level notifications. Under the new plan, firms would only report more serious cases, allowing regulators to focus their attention on significant risks.
Why the change?
The move is part of a wider effort by UK regulators to streamline the rulebook and reduce the cost of compliance, which has grown steadily since the crisis. The FCA and PRA say the changes could save firms around £2 billion over ten years—money that could be reinvested in the business or passed on to customers.
This is not the first time regulators have signalled a desire to ease the burden. Earlier this year, the FCA pledged to make a clearer link between rules and economic growth, a promise that has now translated into concrete proposals. The regulators are also under political pressure to make the UK a more attractive place for financial services after Brexit, as firms weigh the costs of operating in London against other global hubs.
However, the changes will not happen quickly. The consultation period begins now, and the final policy is not expected until 2027. That means any savings will be gradual, and firms will need to wait before they can adjust their compliance budgets.
What it means for investors
For investors, the headline number—£2 billion in savings over a decade—is less important than what it represents: a steady reduction in recurring overhead for UK-regulated financial firms. Compliance and HR/admin costs are part of day-to-day operating expenses, so trimming them can improve cost-to-income ratios, a key metric that measures how much it costs to earn £1 of revenue.
Even if revenue stays flat, lower costs can boost operating margins and return on equity, two measures that investors use to value banks and insurers. Over time, even small, durable cost savings can influence analysts’ earnings forecasts and support share prices.
But the market is likely to treat the benefit cautiously. The consultation is still open, and the final rules are years away. Firms will only realise the savings once the new regime is in place, and even then, they may choose to reinvest the money rather than return it to shareholders. As with any regulatory change, there is also the risk that the final policy differs from the proposal.
For now, the announcement is a positive signal for UK financial stocks, but it is not a catalyst for immediate earnings changes. Investors should watch for the outcome of the consultation and for any signs that firms are actually cutting costs as a result. The broader trend of regulatory easing, however, is worth noting for anyone with exposure to UK banks and insurers.
