Prudential Regulation Authority Rulebook

3.1

This Chapter does not apply to a credit union.

3.2

The Chief Executive function (SMF1) is the function of having responsibility, under the immediate authority of the governing body, alone or jointly with others, for carrying out the management of the conduct of the whole of the business (or relevant activities) of a firm (other than a third country CRR firm).

3.3

The Chief Finance function (SMF2) is the function of having responsibility for management of the financial resources of a firm and reporting directly to the governing body of the firm in relation to its financial affairs.

3.4

The Chief Risk function (SMF4) is the function of having responsibility for overall management of the risk controls of a firm, including the setting and managing of its risk exposures, and reporting directly to the governing body of the firm in relation to its risk management arrangements.

3.5

The Head of Internal Audit function (SMF5) is the function of having responsibility for management of the internal audit function of a firm and for reporting directly to the governing body of the firm on the internal audit function.

3.6

The Head of Key Business Area function (SMF6) is the function of having responsibility for management of a business area or division of a firm (other than a third country CRR firm), where:

[deleted.]

1. (1A) either:
1. (a) both of the quantitative criteria set out in 3.6A are satisfied in respect of the relevant business area or division of the firm; or
2. (b) one of the quantitative criteria set out in 3.6A is satisfied in respect of the relevant business area or division of the firm and the relevant business area or division of the firm performs a critical function; and
2. (2) the person performing that function does not report to a person performing the Head of Key Business Area function in respect of that same business area or division of the firm.

3.6A

The quantitative criteria referred to in 3.6 are that the relevant business area or division of the firm:

1. (1) has gross total assets equal to or in excess of £10 billion; or
2. (2) accounts for more than 20% of the firm’s gross revenue.

3.7

For the purposes of 3.6, the gross total assets of the business area or division of the firm and the percentage of the gross revenue of the firm or group shall be determined on the basis of either:

1. (1) the assets and revenues for the business area or division, and the firm or group, as the case may be, for the firm’s financial year immediately preceding that in which the person is allocated with the specified responsibilities; or
2. (2) if the threshold amount is not met for that period, on the basis of the annual average amount calculated across a rolling period of five years (calculated by reference to the firm’s annual accounting date). Where the firm or the business area or division has been in existence for less than five years, the calculation will be made on the basis of the annual average amount for the period during which the firm or that business line or division has existed (calculated by reference to the firm’s annual accounting date).

3.8

The Chief Operations function (SMF24) is the function of having responsibility for the internal operations and technology of a firm.