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    PRA Consults to Amend Prescribed Responsibility Under SM&CR

    June 07, 2019

    PRA published the consultation paper CP12/19, which proposes to amend the prescribed responsibility for recovery plans and resolution packs and this prescribed responsibility forms part of the Senior Managers and Certification Regime (SM&CR) for strengthening individual accountability. The consultation also sets out consequential changes to the Supervisory Statement SS28/15 titled "Strengthening individual accountability in banking" and the form titled "Senior Managers Regime: Statement of Responsibilities" (also known as SoR form), together with other administrative changes to this form. The consultation period ends on August 07, 2019.

  • The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

    • To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
    • To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
    • To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
    • To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

    The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

     

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    Effective Date: June 18, 2019

    Press Release
  • Proposed Rule 1
  • Proposed Rule 2
  • Proposed Rule 3
  • Presentation on Regulatory Framework (PDF)
  • Presentation on Resolution Plan Rules (PDF)
  • The proposed amendment to the prescribed responsibility is relevant to those UK banks and building societies with GBP 50 billion or more in retail deposits on an individual or consolidated basis at the date of their most recent annual accounts ("in scope" firms). It would result in the existing prescribed responsibility in respect of recovery plans and resolution packs being extended to include an equivalent responsibility for resolution assessments (conditional on the PRA introducing new rules in respect of such assessments). The proposed amendments to the SoR form are relevant to all PRA-regulated firms, including credit unions and small non-Directive insurers. However, for firms that are not subject to any future PRA rules in regard to resolution assessments, there will be no change to the PRA requirements and expectations of them. 

    The SM&CR sets out a number of Senior Management Functions. Individuals holding such functions (Senior Managers) are required to be approved by PRA and/or FCA. Each senior manager must have a SoR that clearly sets out the areas of the firm’s regulated activities for which they are responsible. In doing this, firms must allocate specific responsibilities set out in the PRA Rulebook, known as Prescribed Responsibilities, to its senior managers. All the proposed changes in CP12/19 relate to the prescribed responsibilities. The appendices to CP12/19 contain drafts of the rule-making instrument and amendments to SS28/15 and the SoR form. PRA intends to publish the final policy, rules, expectations, and SoR form in the fourth quarter of 2019. This proposed amendment and the consequential changes to SS28/15 and the SoR form are, however, dependent on the PRA introducing new rules in respect of resolution assessments.

     

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    Comment Due Date: August 07, 2019

    Keywords: Europe, UK, Banking, Insurance, SM&CR, Operational Risk, CP12/19, Governance, Recovery and Resolution, PRA

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