Strengthening individual accountability in banking: responses to CP1/16, and the Certification Part of CP29/15

This Prudential Regulation Authority (PRA) policy statement (PS):

• provides feedback on responses to Consultation Paper 1/16 - Strengthening individual accountability in banking: amendments to notification rules and forms; and
• sets out the amended definition of the term ‘significant risk taker’ in the PRA’s Certification rules as proposed in Consultation Paper 29/15 – Occasional consultation paper.

In CP1/16 the PRA proposed a series of amendments to the Conduct Rules: Notifications and Applications and Notifications Parts of the PRA Rulebook and Forms C, D and L. The aim of the proposed amendments was to update these rules and forms in light of the proposed changes to the Senior Managers and Certification Regimes (SM&CR) in the Bank of England and Financial Services Bill (the Bill). In particular, the proposed removal of section 64B(5) of the Financial Services and Markets Act 2000 (FSMA), which would have required banks, building societies, credit unions and PRA-designated investment firms, collectively referred to as ‘relevant authorised persons’ in section 71A of FSMA as amended by the Financial Services (Banking Reform) Act 2013 (‘Banking Reform Act’), to notify the PRA and/or FCA if they knew or suspected that an individual performing a Senior Management Function (SMF) (‘senior manager’) or otherwise subject to the regulators’ conduct rules had failed to comply with any such rule.

Separately, in CP29/15 the PRA proposed to amend the definition of ‘significant risk taker’ in the PRA’s Certification Parts, which defines the functions that fall into scope of the PRA’s Certification regime. The proposed amendment sought to align the definition of ‘significant risk taker’ more closely to the definition of ‘material risk taker’ (MRT) in Commission Delegated Regulation (EU) No 604/2014 (MRTs Regulation) and the PRA’s Remuneration rules. The amendment will further the PRA’s policy aim of aligning the scope of the Certification regime as closely as possible with the MRT population.

Appendix 1 of this policy statement contains:

• the revised final rules in Conduct Rules: Notifications;
• amended Forms C, D, and L; and
• the amended definition of ‘significant risk taker’ in the Certification rules.

This PS is aimed primarily at ‘relevant authorised persons’. However, in light of the proposed extension of the SM&CR to all PRA-regulated firms in the Bill, it may also be of interest to insurance firms.

The PRA is required by FSMA to have regard to any representations made to the proposals in a consultation, to publish an account, in general terms, of those representations and its response to them, and to publish details of any significant differences in the rules as made. Chapter 2 summarises responses to CP1/16 and sets out the PRA’s response. Following consideration of the representations, no material changes to the rules originally proposed in CP1/16 are being made.

Policy Statement 9/16

Appendices

1. PRA Rulebook: CRR Firms, Non-CRR Firms: Individual Accountability (No.1) Instrument 2016
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2. Form C
3. Form D
4. Form L