This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposed changes and clarifications to requirements relating to intragroup transactions in the Large Exposures (LE) Part of the PRA Rulebook. The PRA also proposes to update Supervisory Statement (SS) 16/13 ‘Large Exposures’ to reflect the updates to PRA expectations.
The PRA has reviewed the intragroup LE framework as part of its overall review of the groups policy framework. The details of this review and the proposed guiding principles are included in CP19/17 ‘Groups policy and double leverage’ (see Related Links). The proposals aim to simplify the overall intragroup LE framework, improve the consistency of the process of granting intragroup permissions and facilitate the orderly resolution of banking groups.
This CP is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms and their qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms and financial institutions that are subsidiaries of these firms, regardless of their location.
Summary of Proposals
The PRA is proposing the following regarding intragroup permissions:
- Enhanced guidance on the application of criteria for core UK group (CUG) and non-core LE group (NCLEG) permissions;
- Changing the NCLEG calibration basis for firms that have both a CUG and an NCLEG permission; and
- Changing how the NCLEG permission applies at the UK consolidated group level.
Due to minimum requirements of own funds and eligible liabilities (MREL), the PRA is also proposing to allow firms to apply to exempt from the LE limit, exposures identified and reported as internal MREL.
Responses and next steps
This consultation closes on Thursday 4 January 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP20_17@bankofengland.co.uk.
The PRA is proposing that the changes to the rules and proposed guidance take effect after the completion of the consultation period and following publication of the final policy.