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Cross cutting publications and updates
PS19/23 – Responses to proposed minor amendments in CP8/23, Chapter 11 of CP12/23 and CP22/23
19 December 2023
This PRA PS provides feedback to responses to the following consultation papers (CP):
- CP8/23 – Occasional consultation paper – April 2023
- Chapter 11 of CP12/23 – Review of Solvency II: Adapting to the UK insurance market
- CP22/23 – Occasional consultation paper – October 2023
This PS also contains the PRA’s final policy in the form of final rules and an updated statement of policy (SoP).
PS19/23 – Responses to proposed minor amendments in CP8/23, Chapter 11 of CP12/23 and CP22/23
CP26/23 – Operational resilience: Critical third parties to the UK financial sector
07 December 2023
This CP is issued jointly by the PRA, the Financial Conduct Authority (FCA), and the Bank of England (Bank) (collectively ‘the regulators’). It sets out the proposed requirements to be established in rules and accompanying expectations for critical third parties (CTPs). For the purpose of this CP, a CTP is an entity that will be designated by HMT by a regulation made in exercise of the power in section 312L(1) of the Financial Services and Markets Act 2000 (FSMA) as amended by the Financial Services and Markets Act 2023 (FSMA 2023).
The key aim of the proposed requirements and expectations in this CP is to manage potential risks to the stability of, or confidence in, the UK financial system that may arise due to a failure in, or disruption to, the services that a CTP provides to one or more authorised persons, relevant service providers (collectively ‘firms’), and/or financial market infrastructure entities (‘FMIs’) (either individually or, where more than one service is provided, taken together).
The regulators consider that the proposals in this CP would allow them to monitor and manage the risks referred to above in an effective but proportionate manner and advance their respective objectives. Crucially, the proposals in this CP will complement but not blur, eliminate, or reduce the accountability and responsibility of firms, FMIs, their boards, and senior management (including any individuals performing Senior Management Functions (SMFs)) from continuing to fulfil their existing regulatory obligations on operational resilience and third-party risk management.
CP26/23 – Operational resilience: Critical third parties to the UK financial sector
The FCA and the PRA launch a new Form A
Thursday 7 December
The PRA and the FCA commenced rolling out a new version of the Form A to dual-regulated firms submitting applications for approval under the Senior Manager Regime.
The new Form A is designed to capture better quality data, be easier to use, and more efficient. Other key changes include:
- a helpful checklist of information you need to complete your application before you start;
- less duplication in the employment history section – if you're a solo-regulated firm, you can input 10 years of employment history instead of uploading a CV;
- improved data validation and pre-population to help you fill in your application quicker;
- the Statement of Responsibilities (SOR) is integrated into the Form A, so you don't need to complete a second application for this;
- removal of the 'Send later' function;
- improved help and guidance throughout; and
- easier navigation and an improved layout.
Firms that have started the application process in Connect (saved as draft) will be able to complete the application on the old version. Applications on Connect that are related to a New Firm Authorisation or Variation of Permission will continue to use the old version of Form A until it is updated in the future.
For more information regarding the new Form A, visit the FCA website.
PS16/23 – Remuneration: Enhancing proportionality for small firms
05 December 2023
This PS from the PRA and the FCA (jointly, ‘the regulators') provides feedback to responses to the PRA’s CP5/23 – Remuneration: Enhancing proportionality for small firms and the FCA’s CP23/11 – Remuneration: Enhancing proportionality for dual-‑regulated firms (‘the CPs’).
It also contains the regulators’ final policy as follows:
- amendments to the Remuneration Part of the PRA Rulebook (Appendix 1);
- amendments to the PRA’s supervisory statement (SS) 2/17 – Remuneration (Appendix 2);
- amendments to the FCA Handbook: Senior Management Arrangements, Systems and Controls (SYSC) sourcebook (Appendix 3);
- amendments to FCA non-Handbook Guidance:
- General Guidance on Proportionality: The Dual-regulated firms remuneration code (FG23/5) (Appendix 4).
- Dual-regulation firms Remuneration Code (SYSC 19D) – Frequently asked questions on remuneration (FG23/4) (Appendix 5).
- General guidance on the application of ex-post risk adjustment to variable remuneration (FG23/6) (Appendix 6).
This PS is relevant to UK banks, building societies, and PRA-designated investment firms, including third-country branches, which are subject to the Remuneration Part of the PRA Rulebook and the Dual-regulated firms Remuneration Code (SYSC 19D) of the FCA Handbook (collectively referred to in this PS as ‘firms’).
PS16/23 – Remuneration: Enhancing proportionality for small firms
Insurance publications and updates
Solvency II Review – considerations for year-end 2023
08 December 2023
This statement relates to HM Treasury (HMT) and the PRA’s reforms to Solvency II to be implemented at year-end 2023, in advance of the PRA’s final decisions on its recent Solvency II reform proposals.
Solvency II Review – considerations for year-end 2023
Letter from Dan Curtis: 2023 Thematic review of expected underwriting profit allowed for in Internal Models for General Insurance firms
08 December 2023
Letter to chief risk officers of general insurance firms regulated by the PRA.
Banking publications and updates
CP28/23 – Leverage ratio treatment of omnibus account reserves and minor amendments to the leverage ratio framework
19 December 2023
This CP sets out the PRA’s proposals to:
- introduce new rules to exclude reserves held on omnibus accounts from the leverage ratio, subject to specific conditions, and to add related material to supervisory statement (SS) 45/15 – The UK leverage ratio framework;
- make minor amendments to SS45/15 to ensure clarity and consistency with PRA rules on other parts of the leverage ratio framework; and
- make minor amendments to the leverage ratio disclosure and reporting instructions to provide clarification of the PRA’s expectations and ensure consistency with PRA rules.
The proposals in this CP would result in changes to:
- the Glossary, Leverage Ratio (CRR), Disclosure (CRR) and Reporting (CRR) Parts of the PRA Rulebook (Appendix 1);
- SS45/15 (Appendix 2);
- the ‘Instructions for leverage ratio disclosures’ (Appendix 3); and
- the ‘Instructions for leverage ratio reporting’ (Appendix 4).
Omnibus accounts are an emerging type of account at central banks where the central bank reserves of several participants are co-mingled in a single account. These accounts are expected to bring a range of wholesale settlement benefits.
PS18/23 – Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251
18 December 2023
This PRA and FCA PS provides feedback to responses to consultation paper (CP) 13/23 – Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251. It also contains the PRA’s and FCA’s final policy, in the form of amendments to Binding Technical Standards (BTS) 2016/2251 and confirmation of the approach to pre-approval of bilateral initial margin models.
This PS is relevant to PRA-authorised banks, building societies, and PRA-designated investment firms in scope of the margin requirements under the European Market Infrastructure Regulation (UK EMIR). In addition, this PS is relevant to all FCA solo-regulated entities and non-financial counterparties in scope of the margin requirements under UK EMIR.
PS18/23 – Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251
PS17/23 – Implementation of the Basel 3.1 standards near-final part 1
12 December 2023
This PRA near-final PS provides feedback to responses to the following chapters of CP16/22 – Implementation of the Basel 3.1 standards:
- Chapter 1 – Overview
- Chapter 2 – Scope and levels of application
- Chapter 6 – Market risk
- Chapter 7 – Credit valuation adjustment (CVA) and counterparty credit risk
- Chapter 8 – Operational risk
- Chapter 10 – Interactions with the PRA’s Pillar 2 framework
- Chapter 13 – Currency redenomination
This near-final PS also contains the PRA’s near-final policy material relevant to the above chapters, as follows:
- near-final PRA Rulebook: CRR Firms: (CRR) Instrument [2024] (Appendix 2);
- near-final statement of policy – Interpretation of EU Guidelines and Recommendations: Bank of England and PRA approach after the UK’s withdrawal from the EU (Appendix 3);
- near-final amendments to supervisory statement (SS) 13/13 – Market risk (Appendix 4);
- near-final amendments to SS12/13 – Counterparty credit risk (Appendix 5);
- near-final PRA Rulebook: CRR Firms: SDDT Regime (Interim Capital Regime) Instrument [2024] (Appendix 6); and
- near-final statement of policy – Operating the Interim Capital Regime criteria (Appendix 7).
In Q2 2024, the PRA intends to publish a second near-final PS to provide feedback to responses to the remaining chapters of CP16/22:
- Chapter 3 – Credit risk – standardised approach (SA)
- Chapter 4 – Credit risk – internal ratings based approach (IRB)
- Chapter 5 – Credit risk mitigation
- Chapter 9 – Output floor
- Chapter 11 – Disclosure (Pillar 3)
- Chapter 12 – Reporting
The second near-final PS will contain the near-final policy material relevant to those chapters as well as feedback to responses on Pillar 2 relating to the Pillar 2A credit risk methodology, use of IRB benchmarks, and the interaction with the output floor.
The PRA has not made final rule instruments at this stage because HMT is required to first revoke the relevant parts of the Capital Requirements Regulation (CRR) by way of statutory instrument (SI) before the PRA can replace them in the PRA rules. Once the SI has been made, the PRA intends to make all the final policy materials, rules, and technical standards in a single, final PS.
The near-final rules included in Appendix 2 are relevant to PRA-authorised banks, building societies, PRA-designated investment firms, and PRA-approved or PRA-designated financial holding companies or mixed financial holding companies (firms). As set out in Chapter 8 – Interim Capital Regime, they do not apply to UK banks and building societies that meet the Small Domestic Deposit Taker (SDDT) criteria and choose to be subject to the Interim Capital Regime (ICR) (see Appendix 6 for the near-final rules applicable to such firms).
PS17/23 – Implementation of the Basel 3.1 standards near-final part 1
Statement of policy – Operating the Interim Capital Regime
12 December 2023
This statement of policy (SoP) sets out the PRA’s approach to operating the Interim Capital Regime (ICR).
It covers:
- how UK banks and building societies (‘firms’) that meet the Small Domestic Deposit Taker (SDDT) criteria, and CRR consolidation entities that meet the SDDT consolidation criteria, can access the ICR;
- how firms and CRR consolidation entities that are part of groups based outside of the UK could access the ICR;
- how firms and consolidation entities will be treated in the case of a merger, acquisition, a disposal of entities or activities, or similar circumstances; and
- how firms that cease to meet the SDDT criteria, and consolidation entities that cease to meet the SDDT consolidation criteria, will transition between the ICR and the Basel 3.1 standards (as implemented by the PRA).
This SoP should be of interest to PRA-authorised banks and building societies, and to CRR consolidation entities, as well as entities prospectively interested in, or currently applying for, authorisation as a deposit-taker. It should be of particular interest to firms that meet the SDDT criteria, and CRR consolidation entities that meet the SDDT consolidation criteria, and firms and CRR consolidation entities wishing to be treated in the same way as firms and CRR consolidation entities meeting those criteria.
SoP – Operating the Interim Capital Regime
CP27/23 – The Prudential Regulation Authority’s approach to policy
08 December 2023
This consultation paper (CP) sets out the approach that the PRA proposes to take to policy under the regulatory framework as amended by the Financial Services and Markets Act (FSMA) 2023 (‘FSMA 2023’ or ‘the Act’). It builds on discussion paper (DP) 4/22 (‘DP 4/22’ or ‘the DP’) – The Prudential Regulation Authority’s future approach to policy – and is relevant to all PRA-regulated firms.
The draft Approach to Policy document (‘Approach Document’) on which the PRA is consulting is available in Appendix 1. By consulting on the approach to policy, the PRA is meeting its public law duty to consult widely where it is fair to do so. The PRA is not introducing rules, and therefore the statutory duty to consult under section 138J Financial Services and Markets Act 2000 (FSMA) does not apply. The PRA’s Practitioner Panel was consulted on the proposals in this CP related to stakeholder engagement.
The PRA’s approach to policy is evolving because it is taking on wider rule-making responsibilities and enhanced accountability requirements. This is a result of reforms to its regulatory framework introduced through FSMA 2023. The Government introduced these reforms to ensure that the UK’s financial services regulatory framework is fit for the future, reflecting the UK’s position outside of the EU.
The PRA received 22 responses to the DP. There were representations from across industry and civil society groups, including consumer advocacy groups, non-governmental organisations, and academia. The PRA is grateful for the constructive and considered engagement from its stakeholders.
CP27/23 – The Prudential Regulation Authority’s approach to policy
PS15/23 – The Strong and Simple Framework: Scope Criteria, Liquidity and Disclosure Requirements
5 December 2023
This PRA PS provides feedback to responses to CP4/23 The Strong and Simple Framework: Liquidity and Disclosure requirements for Simpler-regime Firms and CP14/23 – Pillar 3 remuneration disclosure. In regard to the Small Domestic Deposit Takers (SDDTs) criteria, it also provides feedback to responses to CP16/22 – Implementation of the Basel 3.1 Standards and further feedback to responses to CP5/22 – The Strong and Simple Framework: a definition of a Simpler-regime Firm. It also contains the PRA’s final policy, as follows:
- amendments to the Liquidity Part of the PRA Rulebook (Appendix 1);
- amendments to the Reporting Part of the PRA Rulebook (Appendix 1);
- amendments to the Disclosure Part of the PRA Rulebook (Appendix 1);
- updated supervisory statement (SS) 24/15 – The PRA’s approach to supervising liquidity and funding risk (Appendix 2);
- updated SoP – Liquidity and funding permissions (Appendix 3)
- updated SoP – Pillar 2 Liquidity (Appendix 4); and
- introducing a new SoP – Operating the Small Domestic Deposit Taker regime (Appendix 5).
The PRA has decided to rename Simpler-regime Firms to Small Domestic Deposit Takers (SDDTs), and Simpler-regime consolidation entities to SDDT consolidation entities. These firms will be called SDDTs and SDDT consolidation entities in the final rules and policy documents, as well as in any future Strong and Simple publications. To avoid confusion, throughout the rest of this PS, the PRA will refer to SDDTs, SDDT consolidation entities, the Small Domestic Deposit Takers regime or SDDT regime, and SDDT criteria, rather than Simpler-regime Firm, Simpler-regime consolidation entities, simpler regime, and Simpler-regime criteria, even when referring to past consultations.
This PS is relevant to PRA-authorised banks, building societies, CRR consolidation entities, and entities prospectively interested in, or currently applying for, authorisation as a deposit-taker and prospective CRR consolidation entities. It should be of particular interest to firms and CRR consolidation entities that expect to meet the SDDT criteria and SDDT consolidation criteria respectively, and to firms and CRR consolidation entities that would wish to be treated in the same way as those meeting the criteria. It should also be of particular interest to firms that expect to meet the criteria for small CRR firms in the Remuneration Part of the PRA Rulebook (small remuneration firms).
PS15/23 – The Strong and Simple Framework: Scope Criteria, Liquidity and Disclosure Requirements
CP23/23 – Identification and management of step-in risk, shadow banking entities and groups of connected clients
5 December 2023
This CP sets out the PRA’s proposed rules requiring CRR firms that are not small domestic deposit takers (SDDTs) and CRR consolidation entities that are not SDDT consolidation entities to regularly assess their step-in risk. Step-in risk is the risk that a bank provides financial support to an unconsolidated entity that is facing stress, in the absence of, or in excess of, any contractual obligations to provide such support. The proposals would require firms to develop their own step-in risk policies and procedures and to report their assessment to their supervisor on proposed assessment templates. They build on the work done by the Basel Committee on Banking Supervision (BCBS) in developing its guidelines on the identification and management of step-in risk.
This CP also sets out the PRA’s proposals to transfer the European Banking Authority’s (EBA) guidelines on ‘limits on exposures to shadow banking entities’ and on ‘connected clients’ to PRA Rules and supervisory statements (SS). The PRA considers that its proposal would improve the accessibility and clarity of its policies by streamlining the relevant policy documents and improving the currently fragmented policy landscape as, for example, some of the definitions refer to repealed EU Directives.
The proposals set out in this CP would result in changes to the PRA’s policy material (PRA Rulebook parts and supervisory statements), as set out in the table below.
This CP is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms, PRA-approved holding companies and PRA-designated holding companies and other CRR consolidation entities. The proposals on step-in risk are not relevant to SDDTs and SDDT consolidation entities or firms or undertakings that expect to become an SDDT or an SDDT consolidation entity.
Statement of policy – Operating the Small Domestic Deposit Taker regime
5 December 2023
This SoP sets out the PRA’s approach to operating the Small Domestic Deposit Takers (SDDT) regime. It covers:
- how UK banks and building societies (‘firms’) that meet the SDDT criteria, and CRR consolidation entities that meet the SDDT consolidation criteria can access the SDDT Regime;
- how firms and CRR consolidation entities that are part of groups based outside of the UK could access the SDDT regime;
how firms and consolidation entities will be treated in the case of a merger, acquisition, a disposal of entities or activities, or similar circumstances; - how firms that cease to meet the SDDT criteria, and consolidation entities that cease to meet the SDDT consolidation criteria, will transition out of the SDDT regime; and
- the PRA’s approach to reviewing the SDDT criteria.
This SoP should be of interest to PRA-authorised banks and building societies and to CRR consolidation entities, as well as to entities prospectively interested in, or currently applying for, authorisation as a deposit-taker. It should be of particular interest to firms that meet the SDDT criteria and CRR consolidation entities that meet the SDDT consolidation criteria, and to firms and CRR consolidation entities wishing to be treated in the same way as those that meet the criteria.
SoP – Operating the Small Domestic Deposit Taker regime
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