Strengthening accountability in banking: UK branches of foreign banks

Policy Statement 29/15 | Policy Statement 20/15 | Consultation Paper 9/15

Published on 16 December 2015

Strengthening individual accountability in banking: UK branches of non-EEA banks – PS29/15

Overview

This policy statement (PS) sets out the Prudential Regulation Authority’s (PRA’s) final rules on the application of the Senior Managers and Certification regimes (SM&CR) to UK branches of non-EEA banks and PRA-designated investment firms (non-EEA branches).

On 13 August 2015 the PRA published PS20/15: ‘Strengthening individual accountability in banking: UK branches of non-EEA banks, which provided feedback on CP9/15: ‘Strengthening accountability in banking: UK branches of foreign banks’. 

PS20/15 included a set of final rules for extending the SM&CR to non-EEA branches which the PRA was able to make using its general rulemaking powers under part 9A of the Financial Services and Markets Act 2000 (FSMA), notably on the definition of Senior Management Functions (SMFs) and the allocation of responsibilities to Senior Managers.

In addition, PS20/15 included a set of near-final rules covering the extension of the new regimes to non-EEA branches that could not be made until Parliament approved HM Treasury’s order extending the definition of ‘relevant authorised persons’ in section 71A of FSMA to incoming branches (section 71A order).  In particular these rules covered the certification regime and grandfathering arrangements for non-EEA branches. While the rules could not be published in final form at the time, the PRA considered it important to give firms as much certainty at an early stage to prepare for implementation.

HM Treasury laid the section 71A order before Parliament on 22 July 2015 and it came into force on 9 November 2015. Consequently, the PRA is now able to formally finalise the near-final rules it published in August. As indicated in PS20/15, the final rules included in this policy statement are identical to the near-final rules published in August. In addition, we have made a number of small corrective changes to our rules.

This policy statement also includes the final version of Supervisory Statement 28/15 Strengthening individual accountability in banking, which includes a number of additional paragraphs setting out the PRA’s expectations of how non-EEA branches should comply with certain aspects of the new regimes. These paragraphs cover the scope and prescribed responsibilities for incoming third-country branches, and were included as an appendix to PS20/15. As stated in PS20/15, all other aspects of SS28/15 will apply to non-EEA branches in the same way that they apply to UK firms.

PDFPolicy Statement 29/15

Appendices

  1. PDF PRA Rulebook: CRR Firms Non-CRR Firms: Individual Accountability Instrument (No. 4) 2015
  2. Supervisory Statement 28/15 UPDATE - December 2015

Published on 13 August 2015

Strengthening individual accountability in banking: UK branches of non‐EEA banks – PS20/15

Update 16 December 2015: The PRA published PS29/15 which includes final rules and an updated supervisory statement.

Overview

This policy statement provides feedback on CP9/15 Strengthening accountability in banking: UK branches of foreign banks, and includes final and near-final rules on the application of the Senior Managers Regime (SMR), Certification Regime and Conduct Rules (collectively the new regimes) to UK branches of non-EEA banks and PRA-designated investment firms (non-EEA branches).

The PRA cannot make all the final rules necessary to extend the new regimes to non-EEA branches in full until Parliament approves HM Treasury’s order extending the definition of ‘relevant authorised person’ in section 71A of the Financial Services and Markets Act 2000 (FSMA) to incoming branches (section 71A order). HM Treasury laid the section 71A order before Parliament on 22 July 2015; at the time of writing, Parliament had not yet approved the section 71A order.

Notwithstanding the partial dependency, the PRA considers it important to give all firms as much certainty as possible to prepare for implementation on 7 March 2016. Consequently, this policy statement includes final and near-final rules.This policy statement also includes near-final additions to Supervisory Statement 28/15 Strengthening individual accountability in banking which reflect the PRA’s expectations of how non-EEA branches should comply with certain aspects of the new regimes. All other aspects of SS28/15 as published will apply to non-EEA branches in the same way they apply to UK firms. 

The PRA will publish a final revised version of SS28/15 and its statement of policy on conditions, time limits and variations of approval when it finalises the near-final rules. 

This policy statement also contains other minor amendments and corrections to the PRA rules made in PS3/15 Strengthening individual accountability in banking and insurance — responses to CP14/14 and CP26/14 3 and PS16/15 Strengthening individual accountability in banking: responses to CP14/14, CP28/14 and CP7/15 which were published in March and July 2015 respectively. This policy statement should be read in conjunction with PS3/15 and PS16/15.

Readers may also find it useful to refer to the FCA’s website, in particular the FCA’s feedback statement FS15/3 Strengthening accountability in banking: UK branches of foreign banks – Feedback on ***FCA CP15/10, which contains the FCA’s near‐final rules and guidance on the extension of the FCA’s new regimes to both EEA and non‐EEA branches.

PDFPolicy Statement 20/15 (including Appendix 3)

Appendices

PDFPRA Rulebook: CRR Firms Non-CRR Firms: Individual Accountability Instrument (No 3) 2015

PDFPRA Rulebook: CRR Firms Non-CRR Firms: Individual Accountability Instrument (No .....) 2015 [near-final rules]


Published on 16 March 2015

Strengthening accountability in banking: UK branches of foreign banks – CP9/15

Background

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.

Responses

This consultation closed on 25 May 2015.

PDFConsultation Paper 9/15

PDFPress release

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