In this consultation paper (CP), the Prudential Regulation Authority (PRA) seeks views on its proposed new approach to authorising and supervising international banks, which includes a focus on those that undertake wholesale banking activities in the United Kingdom via branches.
Expanding on the PRA’s general framework as set out in its banking approach document, this CP includes a draft supervisory statement (‘SS’) which sets out the PRA’s new approach to authorising and supervising international bank branches. When it is finalised, having taken into account consultation feedback, it will replace SS10/14 ‘Supervising international banks: the Prudential Regulation Authority’s approach to branch supervision’.
The proposals are relevant to all PRA-authorised deposit-takers and designated investment firms operating in the United Kingdom that are part of non-UK headquartered groups (‘international banks’) and to international banks that may seek PRA authorisation in the future.
Summary of Proposals
This CP and accompanying draft SS set out the PRA’s proposals for a new approach to branch authorisation and supervision. These proposals include an assessment of factors that are relevant both at the time of authorisation and on an ongoing basis during supervision. Accordingly, the factors are described below in the context of an approach to branch authorisation and supervision.
The proposals contain a general approach, applicable to all branches. The proposals also cover the PRA’s additional expectations for significant retail and systemic wholesale branches. For the latter, the key additional expectations concern the PRA’s requirement for a greater degree of supervisability. This focuses on ensuring the PRA has an appropriate degree of influence and visibility over the supervisory outcomes for the firm as a whole and the wider group, so far as relevant to the safety and soundness of the firm and necessary to achieve the PRA’s objectives. In addition, the proposals contain the PRA’s expectations on booking arrangements.
The PRA is proposing that the new approach takes effect after the completion of the consultation period and following publication of the final SS. In particular, for those EEA firms that are currently branching into the UK under the ‘passporting’ arrangements, and which are intending to apply for PRA authorisation in order to continue operating in the UK after the UK’s withdrawal from the European Union, the PRA would apply the new approach set out in the final SS in assessing the firm’s applications. Authorisation under the new regime would come into effect after the UK withdraws from the EU.
Responses and next steps
This consultation closes on Tuesday 27 February 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP29_17@bankofengland.co.uk.
The proposals in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with the EU take effect.