Skip to content
Welcome, thoughtbot's Giant Robots listeners!Start here
UK Startups and Innovation
22APR

FCA and PRA cut SM&CR certification by 15%

3 min read
17:16UTC

Phase one of a 50% reduction target. The single biggest regulatory overhead on small authorised fintechs has finally started to shrink.

← Back to Britain's innovation pipe leaks at both endsJump to analysis ↓
TechnologyDeveloping
Key takeaway

UK fintech's single biggest compliance overhead is shrinking for the first time since 2019.

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) cut certification roles under the Senior Managers and Certification Regime (SM&CR) by 15% on 22 April 2026, phase one of a 50% reduction target. The two regulators also confirmed that the Certification Regime will be removed from primary legislation over time, a structural change rather than a temporary loosening.

SM&CR requires authorised financial firms to individually certify fitness and propriety for every senior and customer-facing employee, each year, with personal regulatory accountability attached to the sign-off. Since its 2019 expansion to all authorised firms, it has been the single largest compliance overhead for small fintechs; a twenty-person payments startup runs the same certification cycle as a 200-person bank. Removing 15% of roles from scope is the first material reduction in that overhead in six years. Phase two takes the cut to 50%.

The FCA and PRA timed the cut to land in the same week as the AI Live Testing second-cohort expansion and alongside the British Business Bank direct-investment mandate. The combined signal to UK fintech is coherent: lower authorised-firm overhead, wider permitted AI experimentation scope, continuing authorisation pipeline capacity. Founders running authorised fintechs at sub-50-headcount will see the concrete effect at the next compliance cycle renewal.

Deep Analysis

In plain English

The Senior Managers and Certification Regime (SM&CR) is a set of rules that requires financial services companies to personally certify that their key staff are fit and proper for their roles, and to hold specific senior managers personally accountable for regulatory failures. It was created after the 2008 financial crisis to ensure that individual bankers could be held responsible rather than just the banks themselves. For small fintech startups, it became a significant administrative burden. The 15% reduction announced this week means fewer roles need to be formally certified, which reduces some paperwork and legal costs for smaller authorised firms.

Deep Analysis
Root Causes

The SM&CR 2019 extension to solo-regulated firms created certification obligations for roles; including some client-service and operations roles at small fintechs; that had no equivalent in the banking sector regime the scheme originally targeted; removing those roles in phase one is a correction of an over-extension rather than a deregulatory choice.

The FCA's Growth and Competitiveness objective, added to its statutory mandate by the Financial Services and Markets Act 2023, creates an explicit duty to consider the competitive impact of regulation; the SM&CR reform is the first material action taken under that duty in fintech, and the scale of the first phase (15% of roles) reflects caution about moving ahead of a 2026-27 Parliamentary review of the Financial Services and Markets Act.

What could happen next?
  • Consequence

    The 50% total certification-role reduction target requires a further 35-percentage-point cut beyond today's phase one; HMRC's autumn 2026 consultation on the Certification Regime's removal from primary legislation is the mechanism for that reduction, and the outcome of that consultation will determine whether the 50% target is reached before the next election.

  • Opportunity

    Fintech firms that currently maintain inflated certification-role counts to protect against regulatory interpretation risk; a common practice identified in Linklaters' survey; will use the phase-one reforms as an opportunity to normalise their compliance structures, producing a one-off audit and legal spend in 2026 followed by structural cost savings from 2027.

Sources:CNBC
Mentions:Financial Conduct Authority →Prudential Regulation Authority →Senior Managers and Certification Regime →HM Treasury →British Business Bank →AI Live Testing →UK Finance →
First Reported In

Update #2 · Britain's innovation pipe leaks at both ends

CNBC· 22 Apr 2026
Read original →
Causes and effects
This Event
FCA and PRA cut SM&CR certification by 15%
The SM&CR 15% cut is the first material reduction in fintech compliance overhead since the regime was expanded in 2019, paired with a sandbox demand surge that suggests a deliberate regulatory-posture shift.
Led to
FCA puts Revolut in stablecoin sandbox
The FCA's stablecoin sandbox is consistent with its drive to cut regulatory overhead, having reduced SM&CR certification roles by 15% in spring 2026.
Occurred 8 Jun 2026
Read story →
Different Perspectives
Nscale and Open Cosmos
Nscale and Open Cosmos
Nscale chose the New York Stock Exchange for its listing on 18 September, putting Britain's largest AI infrastructure bet to American public investors rather than British ones. Open Cosmos took the opposite route four days earlier, raising nine figures from an all-domestic syndicate on five years of profit, evidence that staying is possible when the balance sheet allows it.
Dame Chi Onwurah and the Science, Innovation and Technology Committee
Dame Chi Onwurah and the Science, Innovation and Technology Committee
Committee chair Dame Chi Onwurah wrote to government on 7 September asking how Matt Clifford's conflict at ARIA arose and what safeguards protect its governance, and expects a detailed response. Her question has not yet been put to the Sovereign AI Unit, whose own chair sits at a venture capital firm while overseeing state AI equity.
The Entrepreneurs Network
The Entrepreneurs Network
The Entrepreneurs Network's founder survey found 65% say Britain is easy to start a business in but only 14% say it is easy to scale one, with 82% negative on tax and 74% finding investment hard to access. On this reading the constraint is regulation and tax, not the capital-vehicle design the state keeps adjusting.
New Economics Foundation
New Economics Foundation
The New Economics Foundation argues fiscal accounting rules, not political will, cap what Britain's state capital vehicles can do. Matching the KfW and Bpifrance benchmark of 1% of GDP would need the National Wealth Fund to deploy roughly GBP21bn a year by 2028-29, about four times its current capacity.
Competition and Markets Authority
Competition and Markets Authority
The CMA's 8 September report on public procurement asked whether Britain's roughly GBP400bn state-spending system is built to grow high-potential firms rather than simply widen SME participation. Its Recommendation 5 calls for a dedicated frontier-technology procurement framework, an official acknowledgement that today's design may serve the wrong target.
Highland Europe
Highland Europe
Highland Europe, the growth-equity firm behind a €1bn-plus fund, took €65m from the British Business Bank into its Technology Growth Fund VI on 30 July via British Patient Capital. For a Geneva-based growth investor, the Bank's cheque is routine cornerstone capital, unrelated to which Whitehall department currently claims to sponsor UKRI.