SMF22: Other Local Responsibility Explained
SMF22 is the Other Local Responsibility function. It applies in the UK branches of banks and insurers headquartered outside the UK, and it sits alongside SMF19, the Head of Third Country Branch. Where a senior person in the branch takes on responsibilities that the regulators require to be allocated locally, and they aren’t already approved for another function, they may need approval as SMF22. This guide explains what SMF22 is, when it applies, how it fits with SMF19 and what overseas firms should consider when appointing to it.
Why Branches Have Their Own Functions
A third country branch is part of an overseas firm, not a separate UK company. Its board and most senior executives sit abroad. The UK regulators still need individuals in the UK who are accountable for what the branch does, so the Senior Managers regime applies to branches in a modified form. The most senior person in the branch holds SMF19, the Head of Third Country Branch. Other functions apply to particular roles, such as the branch’s compliance officer and MLRO under the FCA’s rules.
The regulators also require certain responsibilities to be allocated to individuals in the branch. Where one of those responsibilities is given to someone who isn’t already approved for another Senior Manager Function, that person may need approval for SMF22, Other Local Responsibility. SMF22 is a PRA-designated function, and the rules sit in the parts of the PRA Rulebook that apply to third country branches. The FCA’s requirements for branches are in SUP 10C.
When SMF22 Applies
Broadly, SMF22 captures senior people in a UK branch who hold one or more of the responsibilities the PRA requires branches to allocate, but who aren’t covered by another function. The exact responsibilities, and how they should be allocated, are set out in the PRA’s rules for third country branches and can change, so firms should always work from the current rule text and involve their compliance and legal advisers.
| Situation | Likely position |
|---|---|
| Required branch responsibility allocated to the SMF19 | Covered by SMF19; no separate SMF22 needed for that responsibility |
| Required branch responsibility allocated to the branch’s approved compliance officer or another approved Senior Manager | Covered by their existing approval, though their Statement of Responsibilities must be updated |
| Required branch responsibility allocated to a senior person in the branch who isn’t otherwise approved | SMF22 may apply; check the PRA’s rules |
| Senior person in the branch with no allocated required responsibility | SMF22 is unlikely to apply, though the Certification Regime may |
| UK subsidiary of an overseas group | Branch functions don’t apply; the subsidiary has the normal Senior Manager structure |
Our guides to Prescribed Responsibilities and SMF approval for overseas firms explain the wider framework.
How SMF22 Fits With SMF19
The Head of Third Country Branch is accountable for the conduct of the branch as a whole. SMF22 allows the branch to spread specific local responsibilities across more than one accountable individual, which is useful in larger branches where the SMF19 can’t realistically own everything personally. Typical examples might include a senior person responsible for the branch’s finance and regulatory reporting, or for its operations, where those responsibilities are among those the rules require to be allocated.
The important point is clarity. The branch’s responsibilities map should show exactly which responsibilities sit with the SMF19, which with an SMF22 and which with other approved individuals, and how local responsibilities connect to the head office’s own governance. Gaps or overlaps are a common source of supervisory questions.
What the Regulators Expect of an SMF22
- A clear, specific Statement of Responsibilities setting out the local responsibilities the person holds; see writing a Statement of Responsibilities
- Real authority in the UK branch over the areas they’re accountable for, not just a reporting line to head office
- Enough time and presence in the UK to exercise that responsibility
- Good management information on their areas, so they can show reasonable steps
- An understanding of both UK requirements and how the overseas parent manages the same areas
- Compliance with the Senior Manager Conduct Rules and the Duty of Responsibility
Approval and Fit and Proper
An SMF22 candidate is assessed against the fit and proper standards like any other Senior Manager. For candidates transferring from the overseas head office, the regulators will want to see that they understand the UK regulatory framework, not just the home-country rules. Regulatory references can take longer for candidates who have worked overseas, so they should be started early. Our guide to PRA and FCA dual regulation explains how the two regulators work together on approvals.
Scenario: An Asian bank’s London branch has grown significantly, and its Head of Third Country Branch now oversees lending, treasury, operations and finance. A supervisory review suggests that his responsibilities are too broad for one person to own effectively. The branch decides to allocate responsibility for finance and regulatory reporting to its UK head of finance, who isn’t currently approved. After confirming the position under the PRA’s rules, the branch applies for her approval as SMF22, updates both Statements of Responsibilities and revises the responsibilities map.
Recruiting for UK Branch Roles
Overseas firms often fill senior branch roles by transferring people from head office. That brings knowledge of the group, but the regulators will expect UK experience too. Many branches combine the two: a head office transferee alongside locally recruited senior staff who know the UK regime. When recruiting for a branch role that may carry SMF22, firms should:
- Confirm the designation first. Agree which responsibilities the role will hold and whether SMF22 applies.
- Define the local authority. Make sure the person will have real decision-making power in the UK.
- Search for UK experience. Candidates who have held senior roles at UK branches or subsidiaries of overseas banks and insurers are often strongest.
- Plan for approval time. Allow for notice periods and the regulators’ assessment; see how long an SMF appointment takes.
Our Head of Third Country Branch recruitment page covers SMF19 searches, and our overseas firms and group structures service helps groups plan their UK Senior Manager team as a whole. For insurers, see our page on SMF recruitment for insurers.
Working With Head Office
An SMF22 holder sits between two governance systems: the UK regulators’ expectations and the overseas parent’s own reporting lines and policies. That can create tension. Head office may want to manage a function globally, while the UK rules require a named individual in the branch to be accountable for it. The most effective branches agree in writing how decisions affecting the UK are taken, what information the SMF22 receives, and how they can escalate concerns to head office or, where necessary, to the regulators. Documenting those arrangements protects the individual and shows the regulators that local accountability is real rather than nominal.
Common Mistakes
- Leaving everything with the SMF19. In larger branches, concentrating all responsibilities in one person can be unrealistic and invite challenge.
- Allocating responsibilities to people without local authority. If key decisions are actually made at head office, the UK accountable person must still be able to show how they oversee them.
- Not updating documents. When responsibilities move, Statements of Responsibilities and the responsibilities map must be updated, and the regulators notified where required.
- Assuming home-country experience is enough. UK approvals turn on understanding UK requirements.
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Frequently Asked Questions
Who needs SMF22?
Broadly, senior people in a UK branch of an overseas bank or insurer who are allocated responsibilities the PRA requires branches to allocate, and who aren’t already approved for another function. Check the current PRA rules.
Is SMF22 the same as SMF19?
No. SMF19 is the Head of Third Country Branch, accountable for the branch as a whole. SMF22 covers other senior individuals holding specific local responsibilities.
Does SMF22 apply to UK subsidiaries?
No. Subsidiaries are UK companies with their own boards and the normal Senior Manager structure.
Who approves an SMF22?
The PRA, with the FCA’s consent, because it is a PRA-designated function.
Can a head office transferee hold SMF22?
Yes, if they are fit and proper and have real authority in the UK branch, but they will need to show they understand UK requirements.
About the Author
Adrian Lawrence FCA is the founder of SMF Capital. He is a Chartered Accountant and Fellow of the ICAEW, holds a practising certificate in his own name, and is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and has since built a network of five specialist recruitment practices. He leads every SMF Capital search personally. View Adrian’s ICAEW profile.
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