Financial Services Compensation Scheme (FSCS) Protection and the TPR
If the UK leaves the EU without an Implementation Period, FSCS protection will be provided as follows:
Deposit-takers in the TPR with a UK establishment will automatically become members of the FSCS and will be required to comply immediately with the Depositor Protection Part of the PRA Rulebook (including the UK’s depositor awareness and notification requirements, Single Customer View (SCV) requirements, and payment of levies). For example, firms will be subject to the requirements to provide an SCV file to the FSCS within three months of becoming a TPR firm, and within 24 hours of a request by the PRA or FSCS. No transitional relief is available for these requirements. SS18/15 ‘Depositor and dormant account protection’ has been updated to describe the PRA’s expectations.
Protection for eligible deposits held by these UK establishments will begin to be provided by the FSCS upon exit day. FSCS protection will not extend to deposits held by deposit-takers in the TPR without a UK establishment or deposits which are not held by a UK establishment.
More information is available in PS5/19.
Update 13 September 2019: Continuity of access rules –waiver by consent
Deposit-takers entering the TPR or SRO with establishments in the UK in which they hold deposits will be subject to the Depositor Protection Part of the PRA Rulebook (DPP) upon Exit. This waiver by consent is available in relation to such firms and exempts a firm from particular provisions of the DPP, specifically the Continuity of Access rules (DPP 13.4-13.8 inclusive) and from the related Continuity of Access reporting requirements (DPP 15.2-15.4 inclusive and 15.7). Inbound freedom of services firms holding deposits outside the UK are not subject to the Depositor Protection Part, so do not need to request the waiver.
If a firm wants to take up this waiver, it should read the direction and contact the ATLAS Team at the PRA stating that: (a) it has an establishment in the UK that holds deposits, (b) upon Exit it will be within the TPR or SRO (as applicable), (c) upon Exit it will meet Case 3 in the description of the waiver by consent, and (d) it requests the waiver.
The ATLAS Team can be contacted at:
Prudential Regulation Authority
All available waivers and modifications can be found on the Authorisations – Waivers and modifications of rules page.
TPR insurers will be ‘relevant persons’ for purposes of the Policyholder Protection Part of the PRA Rulebook and these firms will be required to pay FSCS levies in respect of new and existing policies that are protected by the FSCS. No transitional relief is available. Currently, EEA insurers conducting insurance activities in the UK using freedom of services or freedom of establishment passports are within scope of FSCS protection for insurance policies.
Policies issued prior to exit day that were FSCS protected policies will continue to be protected for as long as the TPR insurer remains a ‘relevant person’ under FSMA. If an insurer is no longer a ‘relevant person’ under FSMA through the available authorisation mechanisms, policyholders will lose FSCS protection for acts or omissions (insured events) that occur after the loss of ‘relevant person’ status.
For policies issued or re-issued after exit day through a UK establishment of a TPR firm, policies must relate to a risk or commitment situated in the UK, Channel Islands, Isle of Man or Gibraltar in order to be protected. New policies relating to EEA risks will not be protected.
For policies issued or re-issued after exit day through an EEA establishment of a TPR firm, only UK risks will be FSCS protected (new policies relating to EEA, Channel Island, Isle of Man or Gibraltar risks will not be protected). Policies issued through an EEA establishment are only eligible for FSCS protection where the firm does not yet have a UK establishment (eg where a TPR insurer in the process of setting up a UK establishment issues policies through an EEA establishment after exit day).
This means that if a TPR insurer already has an establishment in the UK when it is in the TPR (eg it enters the TPR in respect of both freedom of services and a freedom of establishment business), FSCS protection will be available for policies that the TPR insurer issues after exit day from the UK establishment. Any policies that the TPR insurer issues through the EEA establishment after exit day will not be eligible for FSCS protection.
More information is available in PS5/19 and Appendix 2 ‘PRA Rulebook (EU Exit) Instrument 2019’ in Annex BA ‘Policyholder Protection’.
The FCA is responsible for rules relating to FSCS protection for the following activities: investment provision, investment intermediation, insurance intermediation, debt management and home finance intermediation. For more information about the FCA’s intended approach for FSCS cover for firms in the TPR, please refer to the FCA Consultation Paper CP18/29: ‘Temporary permissions regime for inbound firms and funds’.