PRA proposed, via CP15/21, to make minor changes to its policy on designating investment firms. This includes a proposal to increase the base capital resources requirement for PRA-designated investment firms, thereby aligning this requirement to the same requirement for firms undertaking a similar type of business that is only regulated by FCA and not by PRA (“solo-regulated” firms). The proposals would result in amendments to the Statement of Policy on designation of investment firms for prudential supervision by PRA (Appendix 1) and the Definition of Capital Part of the PRA Rulebook (Appendix 2). CP15/21 is relevant to all PRA-designated UK investment firms. The consultation period on these proposals ends on October 05, 2021, with the proposed effective date of these changes being January 01, 2022.
The proposals would ensure that the PRA policy reflects the impact of the new Investment Firms Prudential Regime proposed by FCA. PRA proposes to amend the Statement of Policy on the designation of investment firms to:
- Reflect HM Treasury’s proposed amendments to the PRA Regulated Activities Order, including the change in the scope of the firms that can be designated
- Explain that there will usually be six months, rather than three months, between the Prudential Regulation Committee designating an investment firm and it becoming PRA-regulated
- Note that PRA will take into account whether or not an investment firm is a clearing member of a central counterparty offering clearing services to other financial institutions (that are not clearing members themselves) when making a designation decision
- Delete any obsolete text and make other minor textual amendments
PRA also proposed to change the Definition of Capital Part to increase the base capital resources requirement for designated investment firms from EUR 730,000 to GBP 750,000 and to denominate it in Sterling. The proposals have been designed in the context of 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.
Comment Due Date: October 05, 2021
Effective Date: January 01, 2022 (Proposed)
Keywords: Europe, UK, Banking, Investment Firms, Designation Process, IFPR, Regulatory Capital, PRA Rulebook, CP15/21, FCA, HM Treasury, PRA
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