Depositor and policyholder protection - technical amendments

Published on 3 July 2015

Depositor and policyholder protection – technical amendments PS15/15

Background

This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses to CP21/15 ‘Depositor and policyholder protection - technical amendments’. It sets out final rules intended to reduce the adverse effects the failure of firms could be expected to have on the stability of the UK financial system and enhance depositor confidence and therefore advance the PRA’s general objective of promoting the safety and soundness of PRA authorised firms.

In CP21/15 the PRA proposed changes to the Depositor Protection Part in the PRA Rulebook and to the transitional provisions and schedules in the FEES Sourcebook (FEES).  The  rule changes arise partly as a result of issues identified with the rules consulted on in CP20/14 ‘Depositor protection’, CP4/15 ‘Depositor, dormant account and policyholder protection - amendments’ and CP15/15 ‘Depositor and dormant account protection- further amendments’ (the CPs) published in October 2014, January and April 2015 respectively. 

The rule amendments seek to reflect depositor preference and to clarify who the Financial Services Compensation Scheme (FSCS) may treat as being  absolutely entitled to deposits, as well as to address minor administrative changes.

The PS is relevant to:

• UK banks, building societies and credit unions as well as to overseas firms with PRA deposit-taking permission and UK branches of European Economic Area (EEA) credit institutions;
• the FSCS, as the administrator of the UK’s Deposit Guarantee Scheme (DGS); and
• depositors.

The FEES transitionals and schedules amendment instrument is also relevant to:

• UK insurers (including those that establish a branch or operate on a freedom of services basis in the EEA);
• EEA insurers that establish a UK branch or operate in the United Kingdom on a freedom of services basis;
• Channel Islands insurers or Isle of Man insurers with UK, Channel Island or Isle of man risks or commitments (PRA-authorised insurers);
• firms (where applicable, being any of the foregoing) that have assumed responsibility for liabilities from PRA-authorised insurers (successors); 
• the Society of Lloyd’s; and
• policyholders.

Summary of the rule changes

Rule changes set out in this PS cover:

• amendments to the recovery rules in the Depositor Protection Part to reflect depositor preference under Article 108 of the Banking Recovery and Resolution Directive.  These rules allow the FSCS to pay over to the depositor recoveries it receives insofar as these exceed the amount that the depositor has been paid by the FSCS;
• a new rule which sets out which person(s) the FSCS may treat as being absolutely entitled to an eligible deposit in circumstances where the account holder is not the person who is absolutely entitled to it;
• an amendment to allow a firm to exclude from its class A tariff base calculation the value of any funds which it has confirmed are not covered deposits;
• minor administrative amendments to Single Customer View (SCV) file and exclusions file requirements to clarify information to be included; and
• an amendment to provide that, from 3 July 2015 until 1 June 2016, the FSCS shall ensure that a depositor that is a small local authority shall have access to their covered deposits within fifteen business days of receipt of a request from the depositor which contains sufficient information to enable the FSCS to make a payment.

The PRA considers that there is only one significant change from the rules consulted upon, which is in respect of the Landlord and Tenant Act 1987 category of accounts which the PRA consulted on including in Depositor Protection 6.10 (which sets out the cases in which a person other than the account holder is treated as being absolutely entitled to an eligible deposit).  This is because the PRA considers the question of which person(s) are entitled to sums in such accounts as being very difficult to determine at any particular point in time and so, under the final rules, such accounts are treated in the same way as other complex trusts with multiple beneficiaries (which is in accordance with Depositor Protection 6.3-6.9).   

Policy Statement 15/15

Appendices

1. Depositor Protection (Amendment No. 2) Instrument 2015 (PRA 2015/56)
2. Depositor Protection (Amendment No. 5) Instrument 2015 (PRA 2015/60)
3. Handbook (Rulebook Consequentials No.2) Instrument 2015 (PRA 2015/58)
4. Statement of Policy

History

For reference, this PS is part of a series of policy developments, details of which can be found in the ‘Depositor, dormant account and policyholder protection – summary’ available in the FSCS section of our website.

Published on 2 June 2015

Depositor and policyholder protection – technical amendments - CP21/15

Background

This consultation paper (CP) sets out proposed changes to the Depositor Protection Part in the Prudential Regulation Authority (PRA) Rulebook and to the FEES transitional provisions and schedules in the PRA Handbook.  The proposed rule changes arise partly as a result of issues identified with the rules consulted on in CP20/14 ‘Depositor protection’, CP4/15 ‘Depositor, dormant account and policyholder protection — amendments’ and CP15/15 ‘Depositor and dormant account protection- further amendments’ (the CPs) published in October 2014, January and April 2015 respectively. Following the CPs the PRA published PS6/15 ‘Depositor and dormant account protection’ and PS9/15 ‘Depositor and dormant account protection - further amendments’ containing amended rules in April and May 2015 respectively. The rule amendments in this CP seek to confirm and clarify arrangements to support depositor preference and the power to ‘look through’ accounts to those absolutely entitled to deposits, as well as to address minor administrative changes.

The package of measures across the PRA’s consultations supports the orderly resolution of deposit-takers and the effective compensation or continuity of access to Financial Services Compensation Scheme (FSCS) covered deposits to depositors.

The consultation is relevant to

• UK banks, building societies and credit unions as well as to overseas firms with PRA deposit-taking permission and UK branches of European Economic Area (EEA) credit institutions;
• the FSCS, as the administrator of the UK’s Deposit Guarantee Scheme (DGS); and
• depositors.

The FEES transitionals and schedules amendment instrument is also relevant to UK insurers (including those that establish a branch or operate on a freedom of services basis in the EEA), EEA insurers that establish a UK branch or operate in the UK on a freedom of services basis, and Channel Islands insurers or Isle of Man insurers with UK, Channel Island or Isle of man risks or commitments (PRA-authorised insurers), firms (where applicable, being any of the foregoing) that have assumed responsibility for liabilities from PRA-authorised insurers (successors), the Society of Lloyd’s and policyholders.

Summary of the proposals covered by the CP

This CP proposes:

• amendments to the recovery rules in the Depositor Protection Part to reflect depositor preference under Article 108 of the Banking Recovery and Resolution Directive. These rules allow the FSCS to pay over to the depositor recoveries it receives insofar as these exceed the amount that the depositor has been paid by the FSCS;
• a new rule which sets out which person(s) the FSCS may treat as being absolutely entitled to an eligible deposit in circumstances where the account holder is not the person who is absolutely entitled to it;
• an amendment to allow a firm to exclude from its class A tariff base calculation the value of any funds which it has confirmed are not covered deposits;
• minor administrative amendments to Single Customer View (SCV) file and exclusions file requirements to clarify information to be included; and
• an amendment to provide that, from 3 July 2015 until 1 June 2016, the FSCS shall ensure that a depositor that is a small local authority shall have access to their covered deposits within fifteen business days of receipt of a request from the depositor which contains sufficient information to enable the FSCS to make a payment.

Appendix 1 of this CP contains the proposed amendments to the Depositor Protection rules found in the Depositor Protection Part of the PRA Rulebook.

Appendix 2 of this CP contains an instrument covering FEES transitionals and schedules.  The PRA consulted on its approach to FEES transitional provisions and schedules (which relate to FEES 6, which sets out rules regarding the funding of the FSCS) in CP4/15. The instrument amending the relevant transitional provisions and schedules was not however included in the CP and is therefore included in this CP.

Appendix 3 of this CP contains proposed amendments to the Deposit Guarantee Scheme Statement of Policy to reflect changes proposed in this CP.

Responses

The consultation closed on Friday 19 June 2015.

Consultation Paper 21/15

History