Published on 26 July 2021
International banks: The PRA’s approach to branch and subsidiary supervision - PS19/21
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 2/21 ‘International banks: The PRA’s approach to branch and subsidiary supervision’ (page 2 of 2). It also contains the PRA’s final Supervisory Statement (SS) 5/21 ‘International banks: The PRA’s approach to branch and subsidiary supervision’ (Appendix 1) which will replace SS1/18 ‘International banks: the Prudential Regulation Authority’s approach to branch authorisation and supervision’.
This PS is relevant to all existing or prospective PRA-authorised banks and designated investment firms that are headquartered outside the UK or are part of a group based outside of the UK.
Summary of responses
The PRA received ten written responses to the CP, in addition to comments received in meetings with interested stakeholders. Respondents generally welcomed the PRA’s proposals and were supportive of the approach of ‘responsible openness’ - the guiding philosophy underpinning the PRA’s approach to international supervision. However, respondents made some observations and requests for clarification.
Broadly, the responses focused on supervisory co-operation, the PRA’s expectations for information sharing, accountability of Senior Management Functions, booking arrangements, operational resilience, and resolution.
The PRA’s feedback to these responses is set out in Chapter 2 of the PS
Implementation
The expectations in SS5/21 take effect, and will replace SS1/18, on Monday 26 July 2021.
The policy set out in this PS has been designed in the context of the UK having left the European Union and the transition period having come to an end. Unless otherwise stated, any references to EU or EU-derived legislation refer to the version of that legislation which forms part of retained EU law.
Appendix
Published on 11 January 2021
International banks: The PRA’s approach to branch and subsidiary supervision - CP2/21
Overview
This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposals regarding its approach to supervising the UK activities of PRA-authorised banks and designated investment firms that are headquartered outside of the UK or are part of a group based outside of the UK. In this CP, such firms are referred to as ‘international banks’. It therefore includes those firms operating in the UK through a branch. It also proposes expectations for receiving information concerning the risks in the wider group, and for co-operation from regulated entities and their supervisors, in order that it can be satisfied that firms are meeting threshold conditions.
The proposals in this CP would result in a new Supervisory Statement (SS) ‘International banks: The PRA’s approach to branch and subsidiary supervision’ (Appendix), which will supersede SS1/18 ‘International banks: the Prudential Regulation Authority’s approach to branch authorisation and supervision’.
This CP is relevant to existing or prospective PRA-authorised banks and designated investment firms that are headquartered outside of the UK or are part of a group based outside of the UK.
The purpose of these proposals is to provide clarity to international banks on the implications for them of the different ways they may choose to structure their operations. The proposals also aim to explain how the PRA would assess such firms against its threshold conditions, particularly the condition relating to the effective supervision of firms, when a firm belongs to a group based outside the UK.
Overall, the PRA’s approach to the supervision of international banks remains stable and consistent following the UK’s withdrawal from the EU. Those firms which have operated in the UK for some time as either branches or subsidiaries should find the proposals to be in line with their experience of the PRA’s supervision. The proposed expectations on subsidiaries and systemic wholesale branches in the proposed SS are consistent with the PRA’s existing supervisory approach, and are intended to provide clarity to firms on what they need to do to meet the PRA threshold conditions. This clarification is particularly timely given the changes in the population of firms that the PRA supervises and the associated changes in firms’ operating structures.
Implementation
The PRA proposes that the implementation date for the final policy would be in the second quarter of 2021.
Readers of this CP may also wish to refer to the Financial Conduct Authority’s (FCA) recently published “Approach to International Firms” document.
Responses and next steps
This consultation closes on Sunday 11 April 2021. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP02_21@bankofengland.co.uk.
The proposals set out in this CP have been designed in the context of the UK having left the European Union and the transition period having come to an end. Unless otherwise stated, any references to EU or EU derived legislation refer to the version of that legislation which forms part of retained EU law . The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework.
Appendix
Proposed SS ‘International Banks: The PRA’s approach to branch and subsidiary supervision’