Capital instruments - pre/post-issuance notification (PIN)

We require pre- or post-issuance (as applicable) notification from some of the firms we regulate if they intend to issue or amend capital instruments that will be included as either capital resources or own funds.

This page was produced before the UK’s withdrawal from the EU. The UK has now entered into a transition period, due to end on 31 December 2020, during which EU law will continue to apply. We will update this page at a later date, as appropriate, to reflect the legal and regulatory framework applicable at the end of the transition period.

Overview

Capital Requirements Regulation (CRR) firms (banks, building societies and PRA UK designated investment firms) and insurers (Solvency II firms and non-Directive firms) must notify us before issuing or amending most capital instruments that they intend to include in capital resources (non-Directive firms) or own funds (CRR firms and Solvency II firms), either at solo and/or (sub)consolidated level. In the case of Tier 2 instruments for CRR firms, as per the new rules as of 1 April 2020, we require notification of issuance on or after the issue date (post-issuance notification).

This is in accordance with the following parts of the PRA Rulebook:

  • Chapter 7 of CRR Firms, Definition of Capital
  • Chapter 5 of SII Firms, Prudential Regulation, Own Funds
  • Chapter 6 of SII Firms, Group Supervision
  • Chapter 3 of Non-Directive Firms, Insurance Company – Capital Resources.

Firms must notify us by sending us a completed pre/post-issuance notification (PIN) form.

Latest updates

9 June 2020: We updated the insurance PIN form to ask firms submitting a PIN intended to apply to group capital to indicate whether an availability determination will be necessary or not, and to explain why.

10 March 2020: We published PS5/20 ‘Regulatory capital instruments: update to Pre-Issuance Notification (PIN) requirements’, relevant to PRA-authorised Capital Requirements Regulation (CRR) firms. These updates will take effect from 1 April 2020.

When to submit a PIN form

Firms should submit a PIN form before issuing or amending any capital instrument (except for Tier 2 instruments for CRR firms) that they intend to include in capital resources or own funds, either at solo, sub-consolidated, group level or any combination of these. 

In most cases, firms should submit the form at least one month before the intended date of issue. However, we may be prepared to accept less than one month’s notice in exceptional circumstances that make it impracticable to give one month’s notice. In such circumstances, a firm must submit an explanation on why it believes there are exceptional circumstances that mean we should accept a shorter notice period, along with the PIN form as far in advance of the issuance or amendments as practicable in those circumstances. Firms may also submit a PIN form when the associated capital instrument’s date of issue or amendment is uncertain.

Firms may notify us no later than the day of issuance of their intention to issue or amend a capital instrument (i.e. same-day notification) if the conditions set out in the relevant part of our rules are fulfilled.

In the case of Tier 2 instruments for CRR firms, as per the updated rules which came into force on 1 April 2020, we require notification of issuance or amendments on or after the issue date (post-issuance notification).

In addition to the PIN submission, firms are reminded that any new Common Equity Tier 1 (CET1) instruments by CRR firms issued after 28 June 2013 require a CRR permission by the PRA before it can classify the instruments as CET1 capital. Once the firm has obtained a CRR Article 26(3) permission from us, the permission extends to all future issuances of capital instruments of the same type and which have the same characteristics as the instrument to which the permission relates. See the CRR permissions page for more details on CRR permission requirements.

In case of amendments to a capital instrument, firms should evaluate whether the proposed changes would affect the eligibility of the instrument and, in the case of a CET1 instrument for CRR firms, whether the CRR Art 26(3) permission granted would still be valid. 

Also, see below for the flow charts relating to CRR firms only.

What to send to us

If you are a CRR firm you need to send the following information to CRRFirms.regulatorycapital@bankofengland.co.uk:

1. A completed PIN form for CRR firms 

2. A copy of the terms and conditions of the capital instrument including any side agreements (in case the terms and conditions are derived from a previous issuance, a marked up copy may speed up our assessment)

3. A current and / or an intended group structure chart

Where applicable (in accordance with the notification requirements for new or subsequent issuances of and amendments to own funds instruments, as set out in Chapters 7A, 7B, and 7C of the Definition of Capital Part of the PRA Rulebook), please enclose:

4. A properly reasoned independent legal opinion from an appropriately qualified individual confirming that the capital instrument meets the conditions for qualification as CET1, AT1 or Tier 2 (as applicable)

5. A Common Equity Tier 1 compliance template completed by an appropriately qualified individual confirming that the capital instrument meets the conditions for qualification as CET1 capital.

6. For AT1 instruments, a properly reasoned accounting opinion by the firm’s auditor on the accounting classification of the instrument

If you are an insurer you need to send the following information to Insurance.regulatorycapital@bankofengland.co.uk:

1. A completed PIN form for insurance firms

2. A copy of the draft terms and conditions of the intended capital resources or own funds instrument

3. For any item other than ordinary shares, a draft of a properly reasoned independent legal opinion from an appropriately qualified individual confirming that the capital instrument meets the conditions for qualification in the intended tier or stage of capital in accordance with Own Funds 5.2(2)(d) or Group Supervision 6.2(2)(f) (Solvency II firms) or Insurance Companies – Capital Resources 3.2(4) (non-Directive firms)

4. For any item intended for inclusion within restricted T1 capital (for Solvency II firms), a draft of a properly reasoned independent accounting opinion from an appropriately qualified individual identifying the instrument’s treatment in the firm or group member’s financial statements in accordance with Own Funds 5.2(2)(e) or Group Supervision 6.2(2)(g)

Submitting the notification to your PRA supervisory contact does not constitute the required notice. Firms may at their discretion copy their PRA supervisor when submitting the notification. 

Why does the PRA need to be notified?

We need this information to:

  • receive consistent data on the quality and quantity of own funds or capital resources issued by all firms
  • have advance notice of any proposed action that would result in a change in a particular firm’s capital position
  • ensure firms have conducted appropriate governance with regard to satisfying themselves that capital items that they intend to count towards satisfying own funds or capital resources requirements meet relevant rules and our expectations regarding capital quality.

Is pre-issuance notification a form of PRA approval?

PIN is not a pre-approval process and we will not provide, nor should we be deemed to be providing, approval (whether explicit or implicit) of any instruments, or confirmation of their eligibility for inclusion in a particular tier of regulatory capital. CRR firms and insurers will continue to be responsible for ensuring that their instruments comply with all relevant rules and our expectations regarding quality of capital.

What happens if the information provided in the notification changes?

If the information provided in the notification changes during the one-month notification period, the firm must provide a further notification to us as soon as it proposes the change, making clear the nature of the amendment(s) or, alternatively, start the notification process anew. Minor amendments (for example, an amendment to the size of issuance or to the issue date) require an amendment to the notification. Where a significant change occurs, (for example, a change in the intended tier of capital or the introduction of new features) firms will need to restart the notification process. If you are unclear about whether to amend or restart notification, please speak with your PRA supervisory contact.

Entities not regulated by the PRA, which are intended to count as regulatory capital for a UK PRA-regulated group

The notification requirement still applies to capital issuances under these entities. We are aware that a UK firm may not always be aware of plans to issue capital at a group level in a timely manner. Therefore, groups with a UK ultimate parent must notify us as soon as they become aware that a direct or indirect subsidiary of that UK parent (including an overseas subsidiary) that is not regulated by us plans to issue capital that the group will count as regulatory capital at the consolidated level. In addition, where a European Economic Area (EEA) insurance group is a sub-group of a wider non-EEA group, pre-issuance notification will only be required for capital issuances intended to count toward group capital requirements at the EEA sub-group level.

This page was last updated 27 October 2020

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