PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA) and the Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020). PS20/21 also contains a new Statement of Policy (SoP) on the supervisory measures and penalties in relation to financial holding companies and an updated SoP on the PRA approach to policy enforcement. The policy presented in PS20/21 will take effect on September 15, 2021.
PRA had proposed, in June 2021, the rules finalized now via the consultation paper CP12/21, to which PRA has received no responses and has thus made no changes. One of the proposals in CP12/21 involved ancillary amendments to the Definition of Capital, Groups, and Notifications Parts of the PRA Rulebook to ensure that, where the application of a consolidated prudential requirement also carries a secondary obligation, that obligation would rest at the appropriate level of application. The amendment to the Groups Part is made as part of the Rules at Annex F of the Rules instrument and will come into force on January 01, 2022, along with the other PRA Rules which implement Basel III. In addition, a new SoP on supervisory measures and penalties in relation to financial holding companies has been published; this SoP sets out the PRA approach to exercising supervisory measures and imposing penalties on UK parent financial holding companies and UK parent mixed financial holding companies (holding companies) pursuant to Part 12B of the Financial Services and Markets Act 2000 (FSMA), covering measures related to the imposition of penalties and the amount of penalties.
The finalized policy is aimed to give effect to the changes in the Capital Requirements Directive V (CRD V), as transposed, and the Capital Requirements Regulation 2 (CRR2), as "onshored," which impose direct responsibility for compliance with the consolidated prudential requirements on approved or designated holding companies. PS20/21 is relevant to financial holding companies, mixed financial holding companies, PRA-authorized banks, and PRA-designated investment firms that are part of a UK consolidation group, controlled by a UK parent financial holding company, or UK parent mixed financial holding company.
- PRA Rulebook Instrument 2021 (PDF)
- SoP on Measures and Penalties (PDF)
- SoP on Policy Enforcement (PDF)
- CP12/21 (PDF)
Effective Date: September 15, 2021
Keywords: Europe, EU, UK, Banking, CRD5, CRR2, PRA Rulebook, PS20/21, CP12/21, FSMA, Regulatory Capital, Prudential Requirements, Financial Holdings, Statement on Policy, Investment Firms, PRA
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