PRA publishes draft rules and statement of enforcement policy for bank holding companies


By way of background, recent changes have been made to the UK’s prudential rules, introducing among other things a new approval and regulatory regime for certain bank (and systemic investment firm) financial holding companies and mixed financial holding companies. This has been achieved primarily by the insertion of a new Part 12B into the Financial Services and Markets Act 2000, which includes the new approval and designation regime. Recent changes to Part 12B FSMA introduced by the Financial Services Act 2021 also give the PRA power to make rules that, among other things, impose requirements on those holding companies on a consolidated or sub-consolidated basis.

The Consultation Paper sets out the consequential amendments to the PRA Rulebook that are necessary to apply the PRA’s existing rules for consolidated prudential requirements to holding companies that have been approved (or designated) under the Part 12B FSMA regime. This means that, in practice, relevant holding companies will become directly responsible for compliance with the requirements (and will be liable to enforcement action by the PRA). The PRA is expecting to do this through the introduction of a new definition, “CRR consolidation entities”, to the Glossary Part of the PRA Rulebook. The relevant rules will be amended so that they apply at the level of the CRR consolidation entity in a group. The PRA is also proposing to make certain other ancillary amendments, for example to avoid duplication by providing that, where a CRR consolidation entity (such as a UK parent financial holding company) has notified the PRA in respect of a new capital issuance in the group, the PRA-authorised firm(s) in the group do not also need to make a notification.

The Consultation Paper also includes a new Statement of Policy with respect to supervisory measures and penalties that the PRA can use and issue under Part 12B FSMA. The PRA notes that it would always be guided by its statutory objectives when exercising its new powers, including its primary objective of promoting the safety and soundness of firms. The PRA also notes that, while it would ensure the use of its powers is proportionate, it would aim to intervene at an early stage and would not hesitate to use its powers where necessary.

The consultation closes on 22 July 2021 and the PRA has proposed that the new rules will start to apply from 15 September 2021.