Two Regulators, Two Sets of Functions

At a dual-regulated firm, Senior Manager Functions are divided between the Prudential Regulation Authority and the FCA. Broadly:

• PRA-designated functions cover most of the firm’s senior leadership and board, including the Chief Executive, Chief Finance and Chief Risk functions, the Head of Internal Audit, the Chief Operations function, the Chair, the chairs of the risk, audit, remuneration and nomination committees and the Senior Independent Director.
• FCA-designated functions include executive directors not otherwise covered, compliance oversight and money laundering reporting, and Other Overall Responsibility.

Each regulator approves the functions it designates, with the consent of the other. In practice, both look at every significant appointment, and firms should expect questions from either. The PRA’s requirements are set out in the PRA Rulebook, and the FCA’s in its Handbook.

What the PRA Looks For

Individual Fitness and Propriety

As with any Senior Manager, candidates must meet the fit and proper test: honesty, integrity and reputation, competence and capability, and financial soundness. For PRA roles, competence is judged against the firm’s safety and soundness, so prudential knowledge carries a lot of weight: capital, liquidity, credit risk, recovery and resolution planning.

Collective Suitability of the Board

The PRA also looks at the board as a whole. It wants to see that, together, the board has the knowledge, skills and experience to understand the firm’s risks and oversee its management. A strong individual candidate may still raise questions if the board already has several people with similar backgrounds and a gap elsewhere. Firms should be able to explain how each appointment fits the board’s overall composition.

Interviews

The PRA frequently interviews candidates for significant roles, particularly at larger firms and for chair, chief executive, chief finance and chief risk appointments. Interviews test the candidate’s understanding of the firm’s business model, its key risks and their own responsibilities. Preparation matters: candidates should know the firm’s capital and liquidity position, recent supervisory priorities and the key issues in their area.

What the FCA Looks For

The FCA’s focus is on conduct: how the firm treats its customers, how it manages financial crime risk and how its culture supports good outcomes. For FCA-designated roles such as compliance oversight and money laundering reporting, it looks for experience in the retail banking conduct issues that matter most, including the Consumer Duty, vulnerable customers, complaints and financial crime. It also considers conduct expertise across the board, particularly among non-executives overseeing retail business.

Building Societies: The Same Regime, a Different Context

Building societies are mutual organisations owned by their members, and that shapes the senior team. Boards must balance the interests of members as savers and borrowers rather than shareholders, and many societies have a strong regional identity and long-standing relationships with their communities. The Building Societies Association represents the sector and publishes guidance relevant to governance.

Senior Manager appointments at societies raise particular questions:

• Board recruitment. Societies often need non-executives who combine prudential expertise with an understanding of mutuality and member interests.
• Scale. Smaller societies may have a compact executive team, with individuals covering several functions. The regulators still expect each function to be covered properly.
• Location. Many societies are based outside London, which narrows the local candidate pool for specialist roles such as chief risk officer or head of internal audit.

Smaller Banks and New Entrants

Smaller banks, including specialist lenders and newer challenger banks, face the full dual-regulated regime with fewer resources. The PRA has developed a simpler prudential framework for smaller domestic deposit takers, but the Senior Managers regime still applies, and the governance expectations remain high.

Common challenges include:

• recruiting experienced chief risk officers and heads of internal audit willing to join a smaller firm
• building a board with enough prudential and conduct expertise
• managing key person dependency where one executive holds several functions
• planning appointments around a growth path that may bring new expectations as the firm expands.

For firms growing towards a banking licence, our SMF authorisation support and multi-SMF team build services help plan the senior team around the application.

Planning a Dual-Regulated Appointment

Allow Enough Time

The regulators can take up to three months to decide a complete application, and appointments to senior dual-regulated roles often involve interviews and follow-up questions. Add the candidate’s notice period, often six months for senior banking roles, and the full process can take the best part of a year. Our guide to how long an SMF appointment actually takes sets out the stages.

Engage the Supervisors Early

For significant appointments, particularly chair, chief executive and chief risk officer, it’s good practice to discuss the appointment with the firm’s PRA and FCA supervisors before submitting the application. Supervisors prefer to hear about senior changes early, and their feedback can shape the search.

Prepare the Board Skills Matrix

Before recruiting to the board, update the board’s skills matrix and identify the gaps. It helps specify the role and gives the PRA a clear explanation of how the appointment strengthens the board’s collective suitability.

Check References Early

Regulatory references covering the previous six years are required for every Senior Manager. For candidates with long careers across several banks, gathering them can take time. Start as soon as the candidate is comfortable.

Head of Internal Audit and Other Specialist Roles

Some dual-regulated Senior Manager roles have a particularly small candidate pool. The Head of Internal Audit function is one. Candidates need a strong audit background, independence from the executive, and enough standing to report directly to the audit committee chair and challenge senior management. Many experienced internal audit leaders are content in their current roles, so these searches usually depend on direct approaches.

The same is true of chief risk officers with deposit-taker experience, especially for smaller firms and building societies outside London. Firms recruiting for these roles should expect a longer search, be clear about how the role will be supported, and consider whether an experienced interim holder is needed while the permanent search runs. Our fractional and interim SMF cover can help bridge that gap.

Board Appointments

Non-executive appointments at banks and building societies carry real weight. The chair, committee chairs and Senior Independent Director are all Senior Manager Functions, and every non-executive contributes to the board’s collective suitability. Our sister practice NED Capital specialises in non-executive and chair appointments, and works with SMF Capital where a board role carries a Senior Manager Function and requires approval.

The Bottom Line

Senior Manager appointments at banks and building societies involve two regulators, a higher bar for prudential expertise and scrutiny of the board as a whole. Firms that plan appointments early, engage their supervisors, and think about how each hire fits the wider team are the ones that avoid delays and questions. Every SMF Capital search for a dual-regulated firm is built around both regulators’ expectations from the start.