Featured Product

    PRA Proposes Approach for Supervision of International Banks

    January 11, 2021

    PRA proposed (in CP2/21) an approach to supervising the UK activities of PRA-authorized banks and designated investment firms that are either headquartered outside the UK or are part of a group based outside the UK. CP2/21 refers to such firms as “international banks.” PRA also proposed expectations for receiving information about risks in the wider group and for co-operation from regulated entities and their supervisors with intention to ensure that firms are meeting threshold conditions. The implementation date for the final policy is proposed to be in the second quarter of 2021 and the feedback period on the consultation ends on April 11, 2021. David Bailey of BoE, in his speech on the PRA approach to supervising international banks, highlighted that the regulator is open to international banks operating in the UK, but they will face the same robust regulation as the other financial service firms in the jurisdiction.

    CP2/21 proposed the arrangements that PRA would expect to be in place to be able to effectively supervise international banks. The proposals would result in a new supervisory statement on approach to branch and subsidiary supervision of international banks (Appendix of CP2/21), which will supersede SS1/18 on the approach to branch authorization and supervision of international banks. The proposed expectations on subsidiaries and systemic wholesale branches in the proposed supervisory statement are consistent with the existing supervisory approach of PRA and are intended to provide clarity to firms on what they need to do to meet the PRA threshold conditions. CP2/21 proposed that certain factors would be relevant when considering an international bank’s compliance with threshold conditions, taking into account its membership of a group, its potential impact on UK financial stability, and the degree of integration between operations inside and outside the UK.

    The expectations of PRA for the information that it requires to effectively supervise a firm vary according to the way in which such a firm’s affairs are integrated or separated from the rest of the group. Consequently, the proposed supervisory statement describes the expectations of PRA for the appropriate degree of separation and controls around the firm’s governance and independent risk management in different circumstances. Although the proposed supervisory statement largely consolidates the existing approach to international banks, PRA recognizes that firms operating with deemed authorizations under the temporary permissions regime may need additional time to adjust. Accordingly, it is proposed that such firms will not need to meet the expectations in the proposed supervisory statement immediately, but will need to do so as soon as practicable and in any event by the time they are authorized by PRA and exit the temporary permissions regime. As part of pre-authorization discussions, PRA proposed that such firms demonstrate how they intend to meet these expectations.

    These proposals aim 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 PRA would assess such firms against its threshold conditions, particularly the condition related to the effective supervision of firms when a firm belongs to a group based outside the UK. Overall, the approach of PRA to the supervision of international banks remains stable and consistent following the withdrawal of UK from EU. The proposals have been designed in the context of the UK having left EU 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. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework.

     

    Related Links

    Comment Due Date: April 11, 2021

    Keywords: Europe, UK, Banking, CP2/21, Governance, Proportionality, Systemic Risk, Threshold Conditions, Foreign Banks, PRA

    Featured Experts
    Related Articles
    News

    BIS Examines Use of Big Data and Machine Learning at Central Banks

    BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.

    March 04, 2021 WebPage Regulatory News
    News

    APRA Finalizes Reporting Standard for Operational Risk Requirements

    APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.

    March 03, 2021 WebPage Regulatory News
    News

    ECB Publishes Guide for Determining Penalties for Regulatory Breaches

    ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.

    March 02, 2021 WebPage Regulatory News
    News

    MAS Sets Out Good Practices to Manage Operational Risks Amid COVID

    MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.

    March 02, 2021 WebPage Regulatory News
    News

    ACPR Announces New Data Collection Application for Banks and Insurers

    ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.

    March 02, 2021 WebPage Regulatory News
    News

    BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox

    BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.

    March 02, 2021 WebPage Regulatory News
    News

    EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models

    EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.

    March 01, 2021 WebPage Regulatory News
    News

    SRB Publishes Overview of Resolution Tools Available in Banking Union

    SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.

    March 01, 2021 WebPage Regulatory News
    News

    EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR

    EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).

    March 01, 2021 WebPage Regulatory News
    News

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    March 01, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6655