Prudential Regulation Authority consults on extending the Senior Managers Regime to UK branches of non-EEA banks
CP9/15 - Strengthening accountability in banking: UK branches of foreign banks
This consultation sets out the Prudential Regulation Authority’s (PRA) and Financial Conduct Authority’s (FCA) proposals for extending and, where appropriate, tailoring the Senior Managers Regime (SMR), Certification Regime and Conduct Rules to UK branches of overseas banks and PRA designated investment firms (‘incoming branches’).
The consultation is in anticipation of secondary legislation which will extend the statutory elements of the above regimes to incoming branches. The consultation builds on the following previous CPs and supervisory statements:
- CP14/14, which consulted on the implementation of the accountability regimes in UK firms;
- SS10/14, which set out the PRA’s supervisory approach for incoming branches;
- CP28/14, which consulted on the technical aspects of the accountability regimes in UK firms; and
- CP7/15, which set out a revised approach to NEDs under the SMR and clarified the PRA’s proposed application of the presumption of responsibility in Section 66B of FSMA for UK firms.
This consultation and the CPs referred to above seek to implement the amendments which the Financial Services (Banking Reform) Act 2013 (the Act) made to the Financial Services and Markets Act 2000 (FSMA) to replace the Approved Persons Regime (APR) for banks, building societies, credit unions and PRA-designated investment firms (collectively referred to as ‘Relevant Authorised Persons’ in section 71A FSMA) with a new regulatory framework for individuals. These statutory changes followed the recommendations of the Parliamentary Commission on Banking Standards (PCBS).
This consultation is relevant to firms identified as Relevant Authorised Persons above, in particular overseas banks and designated investment firms operating in the UK through a branch.
Summary of proposals
Due to limitations on the PRA’s supervisory powers over EEA branches under EU law, the PRA’s proposals in this CP are restricted to incoming non-EEA branches.
Senior Managers Regime
- All incoming non-EEA branches will be required to have their most senior individual approved by the PRA as a bespoke Senior Management Function (SMF) of Head of Overseas Branch.
- Any dedicated CFO, CRO or Head of Internal Audit of an Incoming non-EEA country branch will need to be approved as the branch’s corresponding SMF.
- An individual based in another group entity may require approval as Group Entity Senior Manager of a branch if they take direct decisions relating to its management or the conduct of its UK-regulated activities (e.g. certain Heads of Europe, Middle East and Africa (EMEA).
- Senior Managers in incoming branches will be subject to a customised set of PRA Prescribed Responsibilities reflecting those areas of a branch’s activities which are subject to regulation in the UK.
Certification Regime and Conduct Rules
- The scope of the PRA’s Certification regime for incoming non-EEA branches will be the same as for UK firms; i.e. it will cover staff identified as Material Risk Takers under the PRA’s Remuneration Rules. The scope of the PRA Conduct Rules will also be the same as for UK firms.
This consultation closed on 25 May 2015. Please address any comments or enquiries to CP9_15@bankofengland.co.uk.
The PRA and FCA will share and consider together the feedback received and will publish the finalised rules at a later date.
Strengthening accountability in banking: UK branches of foreign banks – CP9/15
Final policy in relation to this consultation is available under related links.