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PRA consultation CP2-21 – future PRA approach to international bank supervision

PRA consultation CP2-21 – future PRA approach to international bank supervision

Background

  • On 11 January 2021, the Prudential Regulation Authority (PRA) published its Consultation Paper CP2/21: “International banks: The PRA’s approach to branch and subsidiary supervision”
  • This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposals regarding its approach to supervising the UK activities of PRA-authorised banks and designated investment firms that are headquartered outside of the UK or are part of a group based outside of the UK
  • This CP is relevant to existing or prospective PRA-authorised banks and designated investment firms that are headquartered outside of the UK or are part of a group based outside of the UK
  • The PRA proposes that the implementation date for the final policy would be in the second quarter of 2021
  • The FCA is currently considering its final policy and implementation
  • Overall, the PRA’s approach to the supervision of international banks remains stable and consistent following the UK’s withdrawal from the EU
  • The proposals in this CP would result in a new Supervisory Statement (SS) ‘International banks: The PRA’s approach to branch and subsidiary supervision’ (Appendix), which will supersede SS1/18 ‘International banks: the Prudential Regulation Authority’s approach to branch authorisation and supervision’

Impacts

In this CP, such firms are referred to as ‘international banks’.  It therefore includes those firms operating in the UK through a branch.  The PRA also proposes expectations for receiving information concerning the risks in the wider group and for co-operation from regulated entities and their supervisors so that the PRA can be satisfied that firms are meeting threshold conditions.

The purpose of these proposals is to provide clarity to international banks on the implications for them of the different ways they may choose to structure their operations.  The proposals also aim to explain how the PRA would assess such firms against its threshold conditions, particularly the condition relating to the effective supervision of firms, when a firm belongs to a group based outside the UK.

The proposals set out in this CP have been designed in the context of the UK having left the European Union and the transition period having come to an end.

Timeline with relevant dates to be logged on regulatory calendar

  • Consultation closes on 11 April 2021

Next steps

The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP02_21@bankofengland.co.uk.

If anyone has specific questions or needs any advice, contact our specialists.