The Prudential Regulation Authority (PRA) proposed its approach to policy-making as it takes on wider rulemaking responsibilities under the Financial Services and Markets Bill. PRA is requesting comments on the discussion paper until December 08, 2022.
The Financial Services and Markets Bill will implement the outcomes of the Future Regulatory Framework Review, which was established by the UK government to consider how the financial services regulatory framework in UK should adapt for the future and in particular to reflect the UK’s position outside of the European Union. The proposals in the discussion paper have been developed based on the Financial Services and Markets Bill as it was introduced in Parliament on July 20, 2022. The discussion paper focusses on how PRA proposes to make policy and communicate with its stakeholders, along with its aspirations for the PRA Rulebook. It is not about the substance of specific policies. In particular, the discussion paper:
- describes the framework of objectives and regulatory principles within which PRA currently operates, and how it will change after the Financial Services and Markets Bill 2022 receives Royal Assent.
- describes the approach that PRA takes to pursuing its objectives, including early thinking on how it will approach the new secondary objective introduced in the Financial Services and Markets Bill. It also describes the PRA’s approach to considering regulatory principles.
- describes why and how PRA engages internationally to pursue its objectives, including through the development and implementation of international standards. It discusses how the integration of the global financial system benefits the UK financial system while also creating risks, and sets out how PRA responds to these risks. It also describes how PRA takes an outcomes based approach to “equivalence” advice.
- describes PRA’s approach to creating and maintaining prudential policy framework. Much of this will remain consistent with the current approach, though the discussion paper also outlines areas where this approach will change – for instance, in relation to stakeholder engagement.
- outlines the PRA’s ambition to deliver a first-rate Rulebook for the UK, by moving towards a more accessible, usable, efficient, and clearer set of policies. It summarizes four key reforms which are consistent with this outcome. The full implementation of the reform aspirations depends upon when the repeal of retained EU law takes effect, and when rules are made to replace it.
After analyzing responses to the discussion paper, PRA will publish a consultation paper, followed by a final publication on its policy approach. This final publication will be the policy equivalent of the PRA approach to supervision publications.
Keywords: Europe, UK, Banking, Insurance, Regulation and Supervision, Financial Services and Markets Bill, Future Regulatory Framework, Proportionality, Regulatory Framework, Regtech, Basel, IFPR, PRA
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