October 31, 2018

PRA published its approach to banking and insurance supervision. The approach sets out the way PRA performs its role in respect of deposit-takers, designated investment firms, and insurers. The approach documents are intended to aid accountability by describing what and how PRA seeks to achieve its objectives. These documents communicate to regulated firms and insurers what is expected of them and what they can expect in the course of supervision. The approach documents are also intended to meet the statutory requirement for PRA to issue guidance on how PRA intends to advance its objectives. The approach documents sit alongside the requirements and expectations published in the PRA Rulebook and policy publications.

The PRA approach to banking and insurance supervision highlights the following:

  • Having successfully implemented a ring-fence to separate retail banking from global trading, PRA will now police the fence as an integral part of the supervisory approach. PRA will ensure continued compliance with restrictions on activities performed by the ring-fenced banks and their independence from the rest of the group.
  • In the context of firms’ increasing reliance on digital systems and platforms and the risk of cyber-attacks, operational resilience is on track to become as embedded in the supervisory approach as financial resilience. PRA will prioritize the interventions proportionally based on safety and soundness and any potential financial stability implications of potential operational disruptions.
  • Having fully embedded the Senior Managers Regime for banks (and soon also for insurers), individual accountability has become a key tool through which PRA delivers its supervisory approach.
  • PRA is working to ensure that transition to the UK’s new relationship with EU is as smooth as possible in financial services, to minimize risks to its objectives, through mechanisms such as the Temporary Permissions Regime, which will allow to bridge the incoming EU-27 firms for three years while they seek an authorization to continue business in the UK.

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Keywords: Europe, EU, UK, Banking, Insurance, Ring-Fencing, SM&CR, Brexit, Temporary Permissions Regime, PRA