Prudential Regulation Authority Rulebook

3.1

In recent years some firms have conducted ‘liability management’ exercises in which they have bought back some of their outstanding capital instruments. Firms have generally engaged with their supervisors prior to carrying out such exercises. In accordance with the relevant Solvency II provisions¹ the PRA expects that any means by which capital instruments are reduced, repaid or bought back (including share repurchases), will be subject to prior supervisory approval. The PRA also expects firms to ensure that any relevant terms and conditions in their capital instruments include the requirement for such prior supervisory approval.

3.2

Since the economic substance of a substitution of issuer is equivalent to a redemption by the original issuer and issuance by the substituted firm, the PRA regards issuer substitution as falling within the scope of redemption and thus subject to prior supervisory approval.