Top news and publications
- consultation paper 24/23 – Funded reinsurance
- discussion paper 2/23 – FSCS general insurance limit
- policy statement 14/23 – The non-performing exposures capital deduction
News and speeches
The modern gatekeeper − speech by Nathanaël Benjamin
23 November 2023
The PRA’s authorisations function plays an important role as a gateway into UK financial services. In this speech, Nat Benjamin talks about how the function has adapted to the tumult of recent years and offers a vision for a streamlined but robust approach to regulatory transactions that supports the UK's competitiveness in the post-Brexit era.
Cross cutting publications and updates
Seventh edition of the Regulatory Initiatives Grid
30 November 2023
The Regulatory Initiatives Forum Grid (the ‘Grid’) is a biannual publication that sets out the regulatory pipeline. It enables the financial services industry and other stakeholders to understand – and plan for – the timing of the initiatives that may have a significant operational impact on them.
This Grid is published by the Financial Services Regulatory Initiatives Forum (the Forum), launched in 2020 to strengthen coordination between Forum members. The Forum is comprised of the Bank of England (including the Prudential Regulation Authority), Financial Conduct Authority, Payment Systems Regulator, Competition and Markets Authority, Financial Reporting Council, The Pensions Regulator, and Information Commissioner’s Office, with HM Treasury attending as an observer member.
This seventh edition of the Grid follows our short summer update marking the passing of the Financial Services and Markets Act (FSMA) 2023. Following Royal Assent of the Act, regulators have continued working to deliver better outcomes for consumers and industry. For example, the Grid shows how the PRA continues to deliver an ambitious programme of reforms, including the next Strong and Simple consultation, among others.
FSMA 2023 also provides a framework to repeal retained EU law (REUL) relating to financial services, and to replace it with new legislation or regulator rules tailored to the UK. This process is referred to as the ‘Smarter Regulatory Framework’, and we have added a section on it to the Grid in response to stakeholder feedback.
The Grid is normally published on a biannual basis where possible.
CP25/23 – Supervisory statement – Prudential assessment of acquisitions and increases in control
23 November 2023
This CP sets out the PRA and the FCA’s proposals to replace the EU guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector (3L3 Guidelines) with a new PRA supervisory statement (SS) – Prudential assessment of acquisitions and increases in control, and new FCA guidance.
The PRA also proposes to delete SS33/15 – Aggregation of holdings for the purpose of prudential assessment of controllers, the content of which is proposed to be transferred to the new SS. The PRA also proposes to remove reference to the 3L3 Guidelines in its statement of policy (SoP) – Interpretation of EU Guidelines and Recommendations: Bank of England and PRA approach after the UK’s withdrawal from the EU.
The policy proposals included in this CP are:
- a new SS – Prudential assessment of acquisitions and increases in control (Appendix 1);
- a new FCA guidance (Appendix 2);
- the deletion of SS33/15 – Aggregation of holdings for the purpose of prudential assessment of controllers, and the removal of the equivalent section from the FCA Handbook (Appendix 3); and
- the removal of 3L3 Guidelines references in SoP – Interpretation of EU Guidelines and Recommendations: Bank of England and PRA approach after the UK’s withdrawal from the EU (Appendix 4), and equivalent from the FCA Handbook and website.
The PRA’s proposed SS and FCA’s guidance would set guidance and expectations on:
- identifying qualified holdings, including the concepts of significant influence, aggregated holdings (replacing SS33/15) and indirect controllers;
- submitting the change in control notification, the additional information the PRA and the FCA may require, and the approach to completeness;
- the assessment criteria (in accordance with section 186 of FSMA) used to assess notifications to acquire or increase control in PRA and FCA authorised firms operating in the UK; and
- how the PRA and the FCA would use their statutory powers to impose conditions on an approval when it advances their objectives.
The PRA’s primary objectives of firm safety and soundness, and policyholder protection would be advanced by setting out the PRA’s expectations in relation to the prudential assessment of acquisitions and increases in control and updating non-UK specific elements of the EU 3L3 Guidelines. It would also make the PRA’s expectations clearer by bringing all current related guidance into one SS (removing the link to the 3L3 Guidelines and SS33/15). The PRA’s secondary objectives to facilitate effective competition, and competitiveness and growth would be advanced by making the PRA’s expectations and requirements clearer and more transparent to persons proposing to acquire (or increase) control over PRA-authorised firms operating in the UK.
The FCA’s objectives of protecting consumers, enhancing market integrity and promoting competition would be advanced by providing clarity on the factors the FCA would consider when applying the assessment criteria and deciding when a proposed acquirer is suitable to control and/or direct a UK authorised firm.
The CP is relevant to all PRA and FCA authorised firms and all persons to which the Change in Control FSMA part applies. It is also relevant to firms seeking to apply for PRA authorisation in identifying who their controllers are.
Strengthening accountability updates
9 November 2023
The PRA has updated the inventory of senior manager responsibilities to include references made to senior manager responsibilities in PRA publications since its publication (in June 2022). The cut-off date for inclusion in this document was 6 November 2023, and it does not replace/amend any PRA publication nor remove the need to review relevant PRA publications. Stakeholders should continue to refer to the original publications or the PRA Rulebook, and should not regard the inventory as an exhaustive list.
Insurance publications and updates
CP24/23 – Funded reinsurance
16 November 2023
This CP sets out the PRA’s proposed expectations in respect of life insurance firms entering into or holding funded reinsurance arrangements as cedants. Funded reinsurance is a form of collateralised quota share reinsurance contract which transfers part or all of the asset and liability risks associated with a portfolio of annuities to a third party. The contracts are typically collateralised with a portfolio of assets which meets the investment guidelines agreed between the cedant and the third party.
The PRA considers that by setting out its expectations for life insurers’ use of funded reinsurance, the proposals will advance its primary objectives for safety and soundness and policyholder protection while allowing the life insurance sector to continue to play an important role in productive investment in the UK economy. The PRA’s proposals reflect its assessment that there are significant potential risks to the PRA’s primary objectives arising from increased use of funded reinsurance arrangements in the UK insurance industry, including the potential for excessive concentrated exposures to correlated, credit-focused counterparties.
The proposals in this CP result in a new draft supervisory statement (SS) – Funded reinsurance (Appendix 1). This SS would cover expectations on:
- the ongoing risk management of funded reinsurance arrangements;
- the modelling of the solvency capital requirement associated with funded reinsurance arrangements; and
- how firms should consider the structuring of funded reinsurance arrangements.
This CP is relevant to UK Solvency II firms and insurance and reinsurance undertakings that have a UK branch (third-country branch undertakings) when they hold, or are intending to enter into, funded reinsurance arrangements.
PRA statement on the recalculation of the Transitional Measure on Technical Provisions (TMTP) as at year-end 2023
15 November 2023
This statement highlights the PRA's recent invitation to insurance firms to recalculate the Transitional Measure on Technical Provisions.
Bank of England Insurance Taxonomy v2.0.0 Public Working Draft (PWD)
6 November 2023
The PRA published the Bank of England Insurance Taxonomy v2.0.0 Public Working Draft (PWD), setting out the technical implementation of the proposals outlined in CP14/22 and CP12/23.
DP2/23 – FSCS general insurance limit
2 November 2023
This PRA discussion paper (DP) seeks feedback regarding whether it would be appropriate to increase FSCS limits for some or all the GI areas currently protected at 90%. The FSCS protects eligible customers when financial services firms fail. In the case of an insurer that fails, the FSCS will pay eligible policyholders, with a valid claim under an insurance policy, either 90% or 100% of the claim value under that contract of insurance. The level of FSCS protection depends on the type of insurance.
The PRA considers that an increase in coverage for some or all GI areas may be warranted to align FSCS protection for eligible policyholders more closely with the PRA’s objective of securing an appropriate degree of policyholder protection. It would also support the PRA’s objective of promoting the safety and soundness of firms.
This DP seeks input from industry, the public, and other stakeholders to help in the PRA’s assessment of whether, and for which specific types of GI, current FSCS protection levels may be insufficient, taking account of the potential benefits, costs and risks.
This DP also seeks feedback on whether the definition of small business in the Policyholder Protection Part remains appropriate. A small business is currently defined in the Policyholder Protection Part as a partnership, body corporate, unincorporated association, or mutual association with an annual turnover of less than £1 million (or its equivalent in any other currency at the relevant time). The PRA considers that the £1 million per annum threshold may no longer be appropriate as it limits the scope of FSCS protection in respect of certain GI policies to only the smallest businesses. Therefore, this DP also seeks input from industry, the public and other stakeholders, in determining an appropriate threshold.
This DP is relevant to:
- the FSCS as the scheme administrator of the PRA’s Policyholder Protection Rules;
- insurers authorised by the PRA (including EEA insurers that establish a UK branch which has received PRA authorisation) and EEA insurers in the Supervised Run-off or Contractual Run-off regimes;
- firms that have assumed responsibility for liabilities from PRA-authorised insurers (successors); and
Banking publications and updates
Pillar 2 Capital - Operational Risk (FSA072-075) and Pillar 2 Capital - Market Risk (FSA080) data items
The PRA is in the process of changing the way firms submit Pillar 2 Capital - Operational Risk (FSA072-075) and Pillar 2 Capital – Market Risk (FSA080) data items. This includes changing submission format to XML and collection mechanism to The Bank of England Electronic Data Submission (BEEDS) portal. The current target date for the change is late Q1 – early Q2 2024. There will be further communication, including on the implementation date and the publication of XML schemas. Please note that this is a technical change only, there are no changes to the submitted data.
2023 list of UK headquartered global systemically important institutions (G-SII)
28 November 2023
The PRA has disclosed the 2023 list of UK headquartered G-SIIs and their respective buffers.
2023 list of UK firms designated as other systemically important institutions (O-SIIs)
20 November 2023
The PRA is required to identify O-SIIs on an annual basis.
The PRA has conducted its O-SII identification process for 2023, as set out in the statement of policy on The PRA’s approach to identifying other systemically important institutions (O-SIIs). Based on its methodology for O-SII identification, the PRA has designated fifteen firms as O-SIIs.
Other systemically important institutions (O-SII) buffer rates for ring-fenced banks and large building societies
20 November 2023
The PRA is required to set O-SII buffer rates for ring-fenced banks (RFBs) and large building societies by applying the Financial Policy Committee (FPC)’s framework for the O-SII buffer.
In line with the FPC’s updated framework, the PRA has set O-SII buffer rates based on UK leverage exposure measure (LEM) data as of end-2022, assessed on a sub-consolidated basis for RFBs, and on a consolidated basis for building societies. The O-SII buffer rates set out in this publication will apply from 1 January 2025.
Update to Statement of Policy on the PRA’s approach to the implementation of the other systemically important institutions (O-SII) buffer
20 November 2023
The PRA has updated its statement of policy (SoP) on The PRA's approach to the implementation of the O-SII buffer to reflect updates to the FPC’s framework, as per An FPC Response - Amendments to the FPC's framework for the O-SII buffer.
The SoP is relevant to ring-fenced bodies and large building societies that hold more than £25 billion in deposits and shares.
Letter from the PRA on working with Deposit Aggregator
15 November 2023
Letter from the PRA to chief financial officer setting out steps that firms should consider taking to mitigate risks relating to Deposit Aggregators (DAs) that firms may have relationships with – whether now or in the future.
PS14/23 – The non-performing exposures capital deduction
13 November 2023
This PRA policy statement provides feedback to responses to CP 6/23 – The non-performing exposures capital deduction. It also contains the PRA’s final policy, in the form of amendments to the following Parts of the PRA Rulebook:
- Own Funds and Eligible Liabilities (CRR) Part;
- Disclosure (CRR) Part;
- Regulatory Reporting Part; and
- Reporting (CRR) Part.
This PS is relevant to banks, building societies, PRA-designated investment firms and PRA-approved, or PRA-designated, financial, or mixed financial holding companies.
Letter from David Bailey, Nathanaël Benjamin and Vicky Saporta on ‘Innovations in the use by deposit-takers of deposits, e-money and regulated stablecoins’
6 November 2023
Letter from David Bailey, Nathanaël Benjamin and Vicky Saporta on innovations in the use by deposit-takers of deposits, e-money and regulated stablecoins.
Bank Underground – a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England or its policy committees.
Bank Overground – the purpose of Bank Overground is to share our internal analysis. Each bite-size post summarises a piece of analysis that support a policy or operational decision.
European and International developments – readers are referred to the following websites: