Passporting | Notifying the PRA of Passporting | Passporting forms
Subject to its fulfilment of conditions under the relevant single market directive, a firm authorised in a European Economic Area (EEA) state is entitled to carry on permitted activities in any other EEA state by either exercising the right of establishment (of a branch and/or agents) or providing cross-border services. This is referred to in Financial Services and Markets Act 2000 (as amended) (FSMA) as an EEA right and the exercise of this right is known as ‘passporting’.
The activities that are 'passportable' are set out in the relevant EU single market directives. Activities that are not covered by the directives and are not ‘passportable’ will require the firm wishing to carry on such activities to contact the relevant competent authority of that host state in order to determine whether direct authorisation is needed.
Passporting rights only apply within the EEA. So, for example, they do not apply in the Channel Islands or the Isle of Man, as these are not EEA states. Although Switzerland is not an EEA state, Swiss general insurers have the right to set up an establishment in the EEA under the provisions of special bilateral treaties between the European Union and Switzerland. EEA general insurers also have equivalent rights in respect of Switzerland under these treaties. Special arrangements also apply in relation to Gibraltar.
If a regulated firm intends to passport out of or into the United Kingdom under the single market directives, the firm or the EEA home state supervisor, respectively, should inform the appropriate UK regulator of the firm’s intention to do so (for further detail on the appropriate regulator see Notifying the PRA of Passporting).
The Prudential Regulation Authority (PRA) is the lead regulator for outward passports for dual-regulated firms in respect of the nine current single market directives. The PRA will be responsible for assessing these notifications:
- Capital Requirements Directive (2013/36/EU);
- Solvency II Directive (2009/138/EC);
- Insurance Mediation Directive (2002/92/EC);
- Markets in Financial Instruments Directive (2004/39/EC);
- Undertaking Collective Investment Scheme Directive (85/611/EEC);
- Payment Services Directive (2007/64/EC);
- Second Electronic Money Directive (2009/110/EC); and
- Alternative Investment Fund Managers Directive (2011/61/EU).
The PRA will consult the Financial Conduct Authority (FCA) in respect of all passport notifications.
Assessment of outward passporting firms
The PRA will seek reassurance about the risks posed to the PRA’s objectives by UK firms wishing to operate within the EEA. The depth of the PRA’s review of passporting notifications will be proportionate to its impact on the PRA’s objectives, within the extent permitted by the relevant directive.
Upon receipt of an outward passporting notification from a UK firm, the PRA will assess the adequacy of the firm’s resources and administrative structure and whether the firm meets the requirements under the relevant directive. It may also assess whether significant individuals are fit and proper to carry out the proposed business.
The PRA’s powers in relation to outward passporting vary according to the relevant directive; however the PRA will expect firms wishing to passport out of the United Kingdom to provide information likely to inform the PRA’s ongoing supervision of the UK parent and the consolidated group.
The notification must provide the information set out in the single market directive applicable and include whether the intention is to set up an establishment or provide cross-border services into the host state. Credit institutions must include the information required and complete the relevant template set out in Commission Implementing Regulation (EU) No 926/2014.
Any subsequent changes to the original notification details, such as changes of address, management or organisational structure, must be notified to the PRA before the change is implemented (unless caused by circumstances beyond the firm’s control), in accordance with the HM Treasury EEA Passport Rights Regulations (SI 2001/2511).
Credit institutions must notify any such changes to the PRA using the form in Annex I of Commission Implementing Regulation (EU) No 926/2014. If a credit institution plans to terminate the passport it must notify the PRA using the form in Annex IV of Commission Implementing Regulation (EU) No 926/2014.
A firm from an EEA state can passport into another EEA state on either a 'services' (in which it does not have a physical presence in the country it is passporting into) or a 'branch' (in which the firm opens another office in the country it is passporting into) basis. Either way, in most circumstances, the firm will still be regulated by its home state regulator. Customers should always check when dealing with an EEA authorised (passported) firm as its process for dealing with complaints and the compensation customers may be entitled to may differ compared with a UK authorised firm.
Upon receipt of an inward passporting notification from the EEA supervisory authority, the PRA will assess the risk posed by an incoming firm to its objectives and whether a firm meets the requirements under the relevant single market directive.
Home state supervisors should send an inward passporting notice of intention for firms wishing to passport into the United Kingdom to the lead UK regulator. For inward passporting, the PRA is the lead regulator in respect of the following two directives. Notices under the following directives should be sent from the home state supervisors directly to the PRA. The PRA will consult with the FCA in the process.
Assessment of inward passporting firms
The PRA will seek reassurance about the risks posed to the PRA’s objectives by EEA firms wishing to passport into the United Kingdom. The depth of the PRA’s review of passporting notifications will be proportionate to the firm's potential impact on the PRA’s objectives, within the extent permitted by the relevant directive.
This assessment will be based on the information provided by home state regulators and any subsequent information requests. This assessment is intended to inform the dialogue with the home state regulator and to prepare for supervision of the firm.
In some cases, the PRA may judge that an EEA firm notifying the PRA of its intention to passport into the United Kingdom poses risks to its objectives, but does meet the requirements set out by the relevant EU Directives, and therefore has the right to conduct business in the United Kingdom. In such cases, the PRA will carefully consider the tools available to it as a host regulator, acting in cooperation with the home regulator, to mitigate the resulting risks.
The FCA is the lead regulator for inward passporting for all other EEA directives and will consult the PRA in certain circumstances. Home state regulators should send the notice directly to the FCA; the FCA is required to consult with the PRA under certain circumstances for example, where there is a dual-regulated firm in the EEA firm’s immediate group.