Capital instruments - pre-issuance notification

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

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 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.

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

  • Chapter 7 of Definition of Capital
  • Chapter 5 of Own Funds
  • Chapter 6 of Group Supervision
  • Chapter 3 of Insurance Company – Capital Resources.

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

PDFPre-Issuance Notification (PIN) form for CRR firms

PDFPre-Issuance Notification (PIN) form for insurance firms

When to submit a PIN form

Firms should submit a PIN form before issuing any capital instrument that they intend to include in capital resources or own funds, either at solo, sub-consolidated or group consolidated 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 as practicable in those circumstances. Firms may also submit a PIN form when the associated capital instrument’s date of issue is uncertain.
CRR firms and insurers may notify us no later than the day of issuance of their intention to issue a capital instrument (i.e. same-day notification) if the conditions set out in the relevant part of our rules are fulfilled.

In addition to the PIN submission, firms are reminded that any new CET1 instruments 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 Art 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 CRR Permission page for more details on CRR Permission requirements. 

PDFPre-Issuance Notification – How far in advance of issuance must notice be given?

Also, see below for the flow charts on

PDFThe interaction between CRR Art 26(3) permission and PIN process for CET1 instruments

PDFPIN processes for Additional Tier (AT1) and Tier 2 instruments

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 draft terms and conditions of the proposed own funds instrument.
  3. For any item intended for inclusion within CET1 instruments, the terms of the instrument, eg the articles of association, together with any other relevant agreements, such as any shareholders agreement;
  4. For any item intended for inclusion within Common Equity Tier 1 capital, the Common Equity Tier 1 compliance template. This must be completed by an appropriately qualified individual confirming that the capital instrument meets the conditions for qualification as Common Equity Tier 1 capital (in accordance with 7.4 of Definition of Capital).
  5. For any item intended for inclusion as Additional Tier 1 capital or Tier 2 capital, a draft of a properly reasoned independent legal opinion from an appropriately qualified individual confirming that the capital instrument meets the conditions for qualification as Additional Tier 1 capital or Tier 2 capital (in accordance with 7.3(3) of Definition of Capital).
  6. For any item intended for inclusion within Additional Tier 1 capital, a draft of a properly reasoned independent accounting opinion by your auditor (in accordance with 7.2(4) of Definition of Capital).
  7. A written statement that you (intend to) comply with Articles 52(1) (a),(b) and (c) of the CRR (for Additional Tier 1 issuances) or Articles 63 (a),(b) and (c) of the CRR (for Tier 2 issuances).

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 RT1 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 PIN form to your PRA supervisory contact does not constitute the required notice. Firms may at their discretion copy their PRA supervisor when submitting the PIN form. 

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 (PIN) 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.

Does the notification requirement apply to capital issuances by entities that are not regulated by the PRA, which are intended to count as regulatory capital for a UK PRA-regulated group?

Yes. 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.

What happens if the firm wishes to amend the terms of the instrument? 

Firms are required to notify the PRA of its intention to amend or vary the terms of any capital instruments included in its own funds at least thirty days before the intended date of such amendment (PRA Rulebook Definition of Capital Part Rule 8). We will 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. 

This page was last updated 30 April 2018
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