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Home > Prudential Regulation Authority > The implementation of ring-fencing: prudential requirements, intragroup arrangements and use of financial market infrastructures – PS20/16
 

The implementation of ring-fencing: prudential requirements, intragroup arrangements and use of financial market infrastructures – PS20/16

07 July 2016

Overview

This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback on responses received to Consultation Paper (CP) 37/15 ‘The implementation of ring-fencing: prudential requirements, intragroup arrangements and use of financial market infrastructures’.

The appendices to this PS set out the final rules (see Appendix 1) and supervisory statement (see Appendix 2) to implement the proposals consulted on in CP37/15 and the near-final rules and supervisory statements set out in PS10/15 published in May 2015. The appendices also include updated versions of certain PRA publications to incorporate changes in relation to the proposals consulted on in CP37/15, updated for the final policy in this PS (see Appendices 3 to 7).

This PS is relevant to banking groups that will be required by the Financial Services and Markets Act 2000 (the Act) to ring-fence their core activities. This includes both those groups with ‘core’ deposits – broadly those deposits from individuals and small businesses – in excess of £25 billion and those groups with growth plans which expect to exceed this threshold by the Government’s implementation date of 1 January 2019. This PS will also be of interest to financial and other institutions, and customers who have dealings with these banking groups.

This PS covers the following topics:

  • Legal structure and holdings of capital
  • Establishment of an RFB sub-group and application of requirements on a sub-consolidated basis
  • Application of capital and liquidity standards to an RFB sub-group
  • Intragroup concessions
  • Distributions
  • Intragroup transactions and exposures
  • Financial market infrastructures
  • Governance
  • Continuity of services and facilities
  • Compliance with ring-fencing obligations.

The policy contained in the underlying rules and supervisory statements has been designed in the context of the current UK and EU regulatory framework. It will come into effect on 1 January 2019. The PRA will keep the policy under review to assess what changes would be required due to intervening changes in the UK regulatory framework, including as a result of the referendum on 23 June 2016.

Other publications

Alongside this PS, the PRA has also published a further consultation on its proposed ring-fencing policy CP25/16 ‘The implementation of ring-fencing: reporting and residual matters’. CP25/16 sets out the PRA’s proposals in relation to the data it intends to collect in support of its obligations under the Act in respect of ring-fencing. CP25/16 also sets out the PRA’s proposals in respect of residual ring-fencing policy matters which the PRA has identified following the publication of CP37/15.

The PRA has also published PS21/16 ‘Ensuring operational continuity in resolution’ which may be relevant to banking groups required to implement ring-fencing’. 

For more information see ‘Structural reform and operational continuity publications - 7 July 2016’ under Related Links.

Firms’ preparations for ring-fencing

The final rules and statements in the appendices to this PS, together with the final policy in PS21/16 and the proposals in CP25/16, provide banking groups that will be required to implement ring-fencing with the information they need to finalise their plans.

Firms required to implement ring-fencing, ie those which have core deposits in excess of the threshold of £25 billion, should continue to discuss their overall implementation of ring-fencing with their supervisors. Firms should also highlight any changes to their plans made as a result of this PS to their supervisors. Firms with growth plans which indicate they are likely to meet this threshold should discuss with their supervisors.

Policy statement

The implementation of ring-fencing: prudential requirements, intragroup arrangements and use of financial market infrastructures – PS20/16

Appendices
 
The policy outlined above does not take effect until 1 January 2019. Updates referred to in Appendices 3-7 are available for information on the ‘Supporting materials – ring-fencing’ webpage see Related Links.
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