Top news and publications
- Panel appointments: Statement by the PRA and the Bank of England
- PRA statement on the dynamic general insurance stress test in 2025
- policy statement 9/23 – Remuneration: Ratio between fixed and variable components of total remuneration (‘bonus cap’)
News and speeches
Panel appointments: Statement by the PRA and the Bank of England
18 October 2023
This statement sets out the PRA’s approach to appointing members to its statutory panels. Publishing a statement that guides the PRA’s appointments process reinforces the commitment to transparency and will allow the PRA to gain access to wide-ranging expertise, which will contribute to achieving the PRA’s statutory objectives.
Bank failures − speech by Sam Woods
16 October 2023
In his speech, Sam discusses:
- The banking failures this year – in particular the failures of Silicon Valley Bank and Credit Suisse.
- The lessons learnt for regulation, including on risk capture, bank failure and policy for smaller and international banks.
- How the regulatory framework is doing its job of maintaining safety and soundness, and safeguarding financial stability.
The feeling is Mutual − speech by Shoib Khan
2 October 2023
Shoib Khan speaks at the Association of Financial Mutuals Annual Conference 2023, where he discusses the importance of mutual insurers to the PRA’s objectives, and how the PRA seeks to take a proportionate approach in its supervision of the sector. He goes on to outline how proposed reforms to Solvency UK may further support proportionality.
Shoib also explains that mutual insurers, like other firms, should engage with the PRA early when facing challenges, and consider plans that would support an orderly exit from the market if needed.
Cross cutting publications and updates
CP22/23 – Occasional consultation paper – October 2023
11 October 2023
This CP sets out the PRA’s proposals to make minor amendments to PRA rules.
The changes proposed in this CP would:
- amend the Depositor Protection Part of the PRA Rulebook (DPP) to facilitate the ability of the Financial Services Compensation Scheme (FSCS) to pay compensation to eligible depositors of insolvent deposit takers via electronic transfer; and
- amend the Senior Managers and Certification Regime (SM&CR) Forms C and D related to the Financial Conduct Authority’s (FCA) new consumer duty rules.
1.3 The chapters in this CP are relevant to different types of firms, as follows:
- Chapter 2 – this chapter is relevant to the FSCS and of interest to deposit-taking firms and depositors.
- Chapter 3 – this chapter is relevant to all PRA-authorised firms, including credit unions.
FS2/23 – Artificial Intelligence and Machine Learning
This feedback statement (FS) provides a summary of the responses to the Bank and the FCA’s discussion paper DP5/22 – Artificial Intelligence and Machine Learning. The DP, published in October 2022, set out the Bank and the FCA’s views on the issues surrounding use of artificial intelligence (AI) and machine learning (ML) in UK financial services.
The aim of this FS is to provide a summary of responses to the DP. This FS does not include policy proposals nor does it signal how the supervisory authorities are considering clarifying, designing, and/or implementing current or future regulatory proposals on this topic.
Insurance publications and updates
Deep, liquid, and transparent (DLT) assessment for January 2024 implementation
30 October 2023
The DLT assessments were carried out in accordance with the statement of policy – The PRA’s approach to the publication of Solvency II technical information.
CP21/23 – The PRA’s approach to the authorisation and supervision of insurance branches
4 October 2023
This CP sets out the PRA’s proposals to consolidate and formalise existing PRA policy on overseas insurers that write business in the UK through the establishment of a third-country branch, and to offer more clarity on the expectations of these third-country branches. The PRA proposes to make these changes in the light of its experience of authorising and supervising third country insurance branches following the UK’s withdrawal from the EU, and to make consequential changes to reflect the proposals for insurance branches consulted on under CP12/23 – Review of Solvency II: Adapting to the UK insurance market as part of the Solvency II Review.
The PRA proposes to:
- introduce a new statement of policy (SoP) (Appendix 3) that would replace supervisory statement (SS) 2/18 – International insurers: the Prudential Regulation Authority’s approach to branch authorisation and supervision (Appendix 1);
- amend SS44/15 – Solvency II: third-country insurance and pure reinsurance branches (Appendix 4); and
- Amend SS20/16 – Solvency II: Reinsurance – counterparty credit risk (Appendix 5).
The proposals in this CP are relevant to all third-country branch undertakings (as defined in the PRA Rulebook and any insurance undertaking that is not headquartered in the UK or Gibraltar, that is seeking authorisation to operate as a branch in the UK.
PRA statement on the dynamic general insurance stress test in 2025
3 October 2023
The PRA intends to run a dynamic general insurance stress test in 2025.
The objectives of the exercise will be to:
- assess the industry’s solvency and liquidity resilience to a specific adverse scenario;
- assess the effectiveness of insurers’ risk management and management actions following an adverse scenario; and
- inform the PRA’s supervisory response following a market-wide adverse scenario.
The dynamic nature of the 2025 exercise represents a significant change from previous exercises and will involve simulating a sequential set of adverse events over a short period of time. Consequently, the PRA intends to engage with the industry including trade bodies over the next six months, with a view to providing more details of this exercise (including participation, design, and timelines) during the first half of 2024.
Results of this exercise will be disclosed at an aggregate industry level.
Banking publications and updates
DP3/23 – Securitisation: capital requirements
31 October 2023
This DP considers a set of issues relating to capital requirements for PRA-authorised CRR firms' securitisation exposures. These relate to:
- the calibration of the Pillar 1 framework for determining capital requirements for securitisation exposures and their interaction with the Basel 3.1 output floor;
- the hierarchy of methods for determining capital requirements for securitisation exposures; and
- the specification of securitisations that qualify as STS and associated preferential prudential treatment.
This DP seeks views and evidence from market participants on possible approaches to these issues. These will inform the PRA’s further work on a CP on draft PRA rules to replace relevant firm-facing requirements in the Securitisation Chapter of the CRR, currently planned for 2024 H2, subject to HMT taking steps to bring into effect the repeal of the Securitisation Chapter of the CRR.
This DP is relevant to PRA-authorised CRR firms that manufacture or invest in securitisations. It is also relevant to 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. This DP may also be of interest to other firms that are involved in securitisation markets, for example firms providing credit risk mitigation or External Credit Assessment Institutions (ECAIs).
PS9/23 – Remuneration: Ratio between fixed and variable components of total remuneration (‘bonus cap’)
24 October 2023
This PS from the PRA and the Financial Conduct Authority (FCA) (jointly, ‘the regulators') provides feedback to responses to the joint CP PRA CP15/22 and FCA CP22/28 – Remuneration: Ratio between fixed and variable components of total remuneration (‘bonus cap’).
Although the regulators have considered the responses to feedback independently of one another, and in accordance with their statutory objectives, final policy is being published jointly to avoid unnecessary duplication. Responses have been shared between the regulators.
This PS provides the regulators’ final policy as follows:
- changes to the Remuneration Part and the Disclosure (CRR) Part of the PRA Rulebook (Appendix 1);
- changes to the Senior Management Arrangements, Systems and Controls (SYSC) 19D: Dual-regulated firms Remuneration Code that is part of the FCA’s Handbook (Appendix 2); and
- updates to the PRA’s supervisory statement (SS) 2/17 – Remuneration (Appendix 3).
This PS is relevant to banks, building societies, and PRA-designated investment firms, including third-country branches that are subject to the Remuneration Part of the PRA Rulebook and to the FCA SYSC 19D: Dual-regulated firms Remuneration Code (collectively referred to as ‘banks’ in this PS). This PS is not relevant to credit unions, insurers, and FCA solo-regulated firms. While this PS does not affect FCA solo-regulated investment firms that are subject to other Remuneration Codes, it will be of interest to solo-regulated investment firms that are members of a group to which the Dual-regulated firms Remuneration Code applies on a consolidated basis.
PS13/23 – Updating UK Technical Standards on the identification of global systemically important institutions (G-SIIs)
24 October 2023
This PRA PS provides feedback to responses to CP 16/23 – Updating UK Technical Standards on the identification of global systemically important institutions (G-SIIs). It also contains the PRA’s final policy, as shown below:
- amendments to the UK Technical Standards (the UKTS) for the methodology used to identify G-SIIs (Appendix 1).
This PS is relevant to PRA-authorised UK headquartered banks, building societies, PRA-designated UK headquartered investment firms, and their qualifying parent undertakings. The PS is particularly relevant to UK headquartered firms in scope of supplementary reporting for the purposes of identifying and assigning G-SII buffer rates.
Letters to credit unions: PRA annual assessment of the credit union sector – 2023
6 October 2023
Letters to directors of credit unions regulated by the PRA, providing feedback from the PRA’s annual assessment of credit unions.
Letter from Nathanaël Benjamin and David Bailey – Fixed income financing thematic review
5 October 2023
Letter to Chief Risk Officers (CROs) of banks operating in the UK following the Prudential Regulation Authority’s review of fixed income financing businesses.
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: