PRA Archives - The Industry Spread

Second meeting of the PRA and FCA’s joint Climate Financial Risk Forum

August 13, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England, CFRF, Climate Financial Risk Forum, PRA

Since its inception in March 2019, the Climate Financial Risk Forum has set up four technical working groups on disclosure, scenario analysis, risk management and innovation. Each working group is chaired by a CFRF member and supported by an external secretariat. Membership consists of wider industry participants, including trade associations, to ensure the perspective of a broad range of firms is represented. Each working group has planned the approach they propose to take and the outputs they will deliver in terms of practical guidance/ best practice material.

FCA

July 2019 meeting

The PRA and FCA hosted the second meeting of the CFRF in July 2019. At the meeting, the working group chairs presented the draft plans and progress to date. The CFRF members agreed the plans, noting the importance of considering the following:

how outputs draw upon international best practice
how to ensure outputs are suitable for firms of different types, sizes and complexity
how to ensure coordination between the working groups

The meeting also discussed the form of the outputs and the timeline for publishing them, as well as how to get wider industry input into the process. It was agreed that the CFRF will aim to publish these outputs in early 2020.

The next CFRF meeting will take place in Q4 2019.

Full background and information for the launch of the CFRF is available in the Press Release for the first meeting of the PRA and FCA.

FCA and PRA jointly fine Raphaels Bank £1.89m for outsourcing failings

May 31, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England, FCA, PRA, Raphaels Bank

Raphaels Bank has received separate fines of £775,100 from the FCA and £1,112,152 from the PRA in respect of these breaches (resulting in a combined fine of £1,887,252).

Mark Steward, FCA Executive Director of Enforcement and Market Oversight said:

‘Raphaels’ systems and controls supporting the oversight and governance of its outsourcing arrangements were inadequate and exposed customers to unnecessary and avoidable harm and inconvenience. There is no lower standard for outsourced systems and controls and firms are accountable for failures by outsourcing providers.’

Sam woods

Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, said:

‘Firms’ ability to manage outsourcing of any critical activities is a vital part of maintaining their safety and soundness. Such outsourcing is an important part of a firm’s operational resilience, and particularly so in the case of Raphaels given the level of reliance on outsourcing in its business model.

In addition, this was a repeat failing which demonstrates a lack of adequate and timely remediation. This is a significant aggravating factor in this case, leading to an uplift in the penalty.’

Raphaels is a retail bank providing banking and related financial services. Its Payment Services Division (PSD) operates prepaid card and charge card programmes in the UK and Europe. The PSD relies on outsourced service providers to perform certain functions that are critical to the operation of its card programmes. These functions include the authorisation and processing of card transactions, a service performed by third party card processors.

Raphaels failed to have adequate processes to enable it to understand and assess the business continuity and disaster recovery arrangements of its outsourced service providers – particularly how they would support the continued operation of its card programmes during a disruptive event. The absence of such processes posed a risk to Raphaels’ operational resilience and exposed its customers to a serious risk of harm. These risks crystallised on the 24 December 2015 when a technology incident occurred at a card processor.

The incident caused the complete failure of the authorisation and processing services it provided to Raphaels and lasted over eight hours. During this period, 3,367 customers were unable to use their prepaid cards and charge cards. In total, the card processor could not authorise 5,356 customer card transactions attempted at point of sale terminals, ATM machines and online. Seasonal workers, who depended on their cards to receive their wages, used the largest prepaid card programme affected by the incident. The timing of the incident, on Christmas Eve, is likely to have exacerbated the impact of the outage.

Raphaels’ specific failings in relation to the incident resulted from deeper flaws in its overall management and oversight of outsourcing risk from Board level down. The joint FCA and PRA investigation identified weaknesses throughout the Firm’s outsourcing systems and controls which Raphaels ought to have known about since April 2014. These included a lack of adequate consideration of outsourcing within its Board and departmental risk appetites, the absence of processes for identifying critical outsourced services and flaws in its initial and on-going due diligence of outsourced service providers. Raphaels’ outsourcing arrangements continued to be inadequate until the end of 2016, by which time Raphaels had designed new outsourcing policies and procedures to remedy the failings.

Raphaels agreed to resolve this matter and therefore qualified for a 30% reduction in the fines imposed by both regulators. Without this discount, the combined fine imposed by the FCA and PRA would have been £2,709,574.

Press release

UK Financial Conduct Authority and Australian Securities and Investments Commission agree to strengthen cooperation post-Brexit

April 9, 2019 by Reg Hub Leave a Comment Filed Under: Regulatory Annoucements Tagged: AIF, AIFM, ASIC, Brexit, CRA, ESMA, European Commission, FCA, MoU, PRA

The UK Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC) today announced they have agreed two Memoranda of Understanding to ensure there is continuity once the UK leaves the European Union. The MoUs cover trade repositories and alternative investment funds (AIFs).

These agreements will provide reassurance by ensuring arrangements are in place for cross-border cooperation between the FCA and ASIC. The FCA and ASIC also support the continuity of existing equivalence decisions to provide certainty to businesses post-Brexit.

Andrew Bailey, Chief Executive, FCA said: ‘The FCA and ASIC have always had a strong relationship, which will continue after Brexit. The MoUs we have agreed today will ensure the FCA and ASIC have uninterrupted exchange of information and can supervise cross-border activity of firms. They provide a strong signal to the markets that the UK will continue to play an important role after Brexit. The MoUs will also provide much-needed assurance to our regulated stakeholders.

‘We also support the continuity of existing equivalence decisions which will minimise disruption for firms in the UK and Australia.’

James Shipton

James Shipton, Chair, ASIC said: ‘ASIC is pleased to have cooperation arrangements in place with the FCA on trade repositories and alternative investment funds. While the FCA and ASIC have always maintained a very close relationship on supervisory and enforcement matters, these two MOUs will enhance cooperation and information sharing between the authorities. Our commitment to ensuring the continuity of equivalence decisions will provide certainty to businesses and consumers and contribute to a fair, strong and efficient financial system.’

These MoUs will enter into force on the date EU legislation ceases to have direct effect in the UK. This will occur when the UK leaves the EU, or at the end of the transition period if a Withdrawal Agreement is in place.

MoU on trade repositories

A new MoU on trade repositories is required because the FCA will acquire functions and supervisory powers in relation to trade repositories, which are currently supervised at the European level by the European Securities and Markets Authority (ESMA).

The MoU on trade repositories will ensure that ASIC can continue to access data on derivatives contracts held in UK trade repositories, where the information is needed for ASIC to fulfil its responsibilities and mandates. The MoU is established under Article 76(2) of the UK’s onshored European Market Infrastructure Regulation (UK EMIR). This provision aims at ensuring that third-country authorities such as ASIC, that do not have any trade repository in their jurisdiction, may access the information on derivatives contracts held in UK trade repositories which is relevant for their mandates.

Read the MoU on trade repositories

MoU on AIFs

The MoU on AIFs has been updated to reflect the regulatory regime that will apply in relation to AIFs in the UK post-Brexit. The MoU on AIFs provides a framework for the FCA and ASIC to work together to ensure alternative investment fund managers (AIFMs) and AIFs that operate on a cross-border basis are properly supervised in the UK and Australia. The MoU will cover Australian managers that manage or market AIFs in the UK and UK managers that manage or market AIFs in Australia, as well as their delegates and depositaries. The existence of an MoU between ASIC and the FCA is a precondition of the UK’s AIFM regime, for allowing managers from third countries access to the UK market.

Read the MoU on AIFs

Equivalence decisions

HM Treasury has confirmed that existing equivalence decisions granted in respect of Australia by the European Commission (EC) before exit day, will generally be incorporated into UK law and will continue to apply post-Brexit. The UK will adopt existing EU equivalence decisions that relate to Australia’s supervisory and regulatory regime for trading venues, OTC derivatives markets and credit rating agencies.

Similarly, ASIC remains committed to take steps to provide, where appropriate, for continuing recognition post-Brexit of the equivalence of the UK’s regulatory and supervisory regime in relation to UK-based foreign financial services providers and market operators that operate in Australia under licences and exemptions or are otherwise recognised for the purposes of the Australian regulatory regime.

Background

For more information about the Financial Conduct Authority, contact the FCA press office on 020 7066 3232 or press.office@fca.org.uk.

For more information about the Australian Securities and Investments Commission, contact the ASIC Media Unit on 1300 208 215 or media.unit@asic.gov.au.

Find out more about the MoU on trade repositories and the MoU on AIFs.
A new MoU on credit rating agencies (CRAs) will no longer be required between the FCA and ASIC because the requirement to have an ‘appropriate cooperation’ agreement in place, for the purpose of both endorsement and certification of CRAs located in a third country jurisdiction that has been deemed equivalent, has been removed from the UK’s onshored Credit Rating Agencies Regulation. The FCA and ASIC will continue to rely on our 2002 MoU to cooperate and share information in relation to CRAs.
Find out more information from the FCA about preparing for Brexit.
On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
Find out more information about the FCA and ASIC

See ASIC Media Release Preparing for Brexit and the FCA Brexit webpage.

First Meeting of the PRA and FCA’s joint Climate Financial Risk Forum

March 16, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Bank of England, CFRF, Climate Financial Risk Forum, Deputy Governor, FCA, Financial Sector, future stability, industry, PRA, UK financial system

On Friday 8 March, the PRA and FCA hosted the first meeting of the Climate Financial Risk Forum (CFRF). The objective of the CFRF is to build capacity and share best practice across financial regulators and industry to advance financial sector responses to the financial risks from climate change.

It brings together senior representatives from across the financial sector, including banks, insurers, and asset managers. The forum is chaired by Sarah Breeden (Executive Director of International Banks Supervision, PRA) and Christopher Woolard (Executive Director of Strategy and Competition, FCA). It will meet three times a year and will report to Sam Woods (CEO of the PRA and Deputy Governor at the Bank of England) and Andrew Bailey (CEO of the FCA).

Climate change and society’s response to it presents financial risks that are relevant to the PRA’s and FCA’s objectives. While these risks may crystallise in full over longer-time horizons, they are becoming apparent now. Firms are enhancing their approaches to managing these risks, but face barriers to implementing the forward-looking, strategic approach necessary to minimise the risks. The CFRF aims to reduce these barriers by developing practical tools and approaches to address climate-related financial risks.

Membership is representative of the UK financial sector, including firms of varying size, business model, and maturity of approach to climate-related risks. The full list of members is as follows:

Banks	Insurers	Asset managers	Other
BNP Paribas	Aviva	Blackrock	Green Finance Institute
HSBC	Legal & General	Hermes	London Stock Exchange Group
JP Morgan	Lloyd’s of London	Invesco
RBS	RSA Insurance Group	Schroders
Yorkshire Building Society	Zurich	Standard Life Aberdeen

The forum will also include observers from trade bodies to represent a broader range of firms and ensure the outputs of the CFRF are communicated to their members.

Andrew Bailey

Andrew Bailey, Chief Executive of the FCA, said:

‘The first forum meeting today was an important step in tackling a major threat to the future stability of the financial system. The FCA and PRA have been working closely together, combining and building on our joint knowledge, to develop an approach which will enhance the UK financial system’s resilience to climate change. The Climate Financial Risk Forum will seek to encourage approaches in the financial sector, managing the financial risks from climate change as well as supporting innovation in green finance.’

Sam Woods

Sam Woods, Deputy Governor and CEO of the PRA, said:

‘Climate change has the potential to create significant financial risks for the firms the PRA regulates. The challenge we face in mitigating these risks is unprecedented, and we need to begin to act now if we are to ensure an orderly transition to a low-carbon economy. The establishment of the Climate Financial Risk Forum will provide a platform through which the PRA, FCA and industry can share experience and build expertise as we begin this work.’

At its first meeting, the forum decided to set up four working groups to focus on risk management, scenario analysis, disclosure, and innovation. Each working group will be chaired by a member of the forum and will meet more frequently than the CFRF, reporting back at each CFRF meeting. The aim is to produce practical guidance on each of the four focus areas. The final outputs will be shared with industry more widely. Membership of the working groups will be wider than the forum to allow them to draw on expertise as necessary, such as from academia and industry.

Notes to editors

Joachim Wuermeling: Brexit – implications for UK branches of German banks

February 19, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Brexit, EU27, EU28, German banks, PRA, SSM, UK

1 Introduction

Ladies and gentlemen,

From the perspective of a bank and from my perspective as a banking supervisor, the future regime under which banks and companies in general will operate after 29 March 2019 remains unclear. And whether we like it or not, a hard Brexit has become increasingly likely.

2 Implications of UK branches becoming third country branches

This means that – given what we know at the moment – UK branches of German banks (and SSM banks in general) will need to become third country branches.

Certainly, the PRA’s temporary permissions regime buys time. Nevertheless, there is no alternative to conversion into third country branches. The PRA has already received some applications for third country branch authorisation in the UK.

For German banks, unlike other SSM banks, there is no formal requirement for the home supervisor to approve a third country branch. However, given the aim of establishing a level playing field among all current and future SSM banks, you should expect the SSM to address certain requirements via other supervisory measures where necessary to ensure that the future set-up of the new third country branches is in line with SSM expectations.

This means that the SSM will not accept empty shells, neither from incoming nor from outgoing banks. A third country branch will not be allowed to perform central functions for its SSM-domiciled group. And any outsourcing must not hamper the efficient and effective supervision of SSM entities.

Not all SSM banks are currently fully compliant with the SSM’s respective supervisory expectations. In particular, all banks must ensure that they have relocated sufficient staff to the EU27 entities.

EU business must be booked from within the EU27. This will require significant asset transfers in several cases. Sufficient trading and risk-management staff as well as technical infrastructure are needed on site at the EU27 entities to ensure adequate risk management.

Flag EU with flags of countries – members of European Union

3 Split of responsibilities between PRA and SSM

Making the transition from the EU28 to the EU27 as smooth as possible for the financial sector will require close cooperation between the SSM and the PRA. The details of such a split of responsibilities are currently being negotiated.

I am convinced that London will remain an important financial centre after Brexit, and I have no doubt that the financial ties between London and the EU27 will remain strong – all of you will work to ensure that. Close cooperation and a continued dialogue between the supervisory authorities will therefore be necessary, especially in times of crisis.

I believe that the SSM and the PRA should ensure information sharing and reciprocal consultation while respecting independent supervisory decision making in each jurisdiction.

Now I’m sure you are wondering what a split of responsibilities would mean for UK branches of German (and other SSM) banks. The truth is: we can’t really tell just yet.

We’ll have to wait for the final outcome of the negotiations between supervisory authorities. As I have said, these negotiations are already under way, and I am optimistic that they will be concluded soon. Overall, our goal must be to achieve an adequate level of information sharing and joint supervisory work that does not lead to an increased workload for all parties involved.

Certainly, it will not be possible to develop a one-size-fits-all solution. The agreement on a split of responsibilities will need to leave room for accommodating specific cases.

On the basis of the agreement, the PRA plans to process applications for third country branches.

4 Conclusion

Ladies and gentlemen,

In the short run, the temporary permissions regime will mitigate the outcome of a possible hard Brexit. Nevertheless, thorough preparations by financial institutions are necessary.

What happens in the long run depends on how Brexit re-shapes the European financial system.

Where does all this leave us? In a way, you could simply say: uncertainty continues.

But we should not forget that we have made quite some progress since the referendum in June 2016. At that time, Brexit and its potential repercussions were essentially a black box.

Since then, both financial institutions and supervisors have put tremendous effort into better understanding and preparing for every possible outcome. And while some tasks are yet to be completed, most banks are well advanced in their preparations.

Solvency II: Data Collection of Market Risk Sensitivities

July 29, 2018 by industryspread Leave a Comment Filed Under: Central Bank Annoucements Tagged: changes in market, data collection, financial situation, insurance firm, Market Risk, PRA, regulatory reporting, Solvency II

This supervisory statement sets out the Prudential Regulation Authority’s (PRA) expectations in respect of the reporting of sensitivities of solvency position to various changes in market risk.

The firms in scope are those insurance or reinsurance firms most exposed to market risks. These are primarily Category 1 and 2 firms in the life sector, and any other category life firm or general insurance firm, or composite insurance firm that demonstrates material market risk exposures. The PRA will inform firms individually through their usual supervisory contacts whether they fall within the scope outlined above. A firm that has not been contacted but would like to submit the information may do so after discussion with its usual supervisory contact.

The information requested will enable the PRA to understand how a firm’s financial situation, and through extrapolation that of the sector as a whole, might alter in a stressed scenario.

The PRA expects firms in scope to report sensitivities to various changes in market risks half-yearly, four weeks after the formal submission of solo quarterly Quantitative Reporting Templates for end June and end December.

The appendices to the statement include links to a template and instructions, available on the Regulatory reporting: insurance firms webpage.

Payment Systems Memorandum of Understanding

July 27, 2018 by industryspread Leave a Comment Filed Under: Central Bank Annoucements Tagged: Bank of England, Banking Reform Act, FCA, Financial Conduct Authority, financial stability, MoU, payment systems, PRA, Prudential Regulation, regulatory

Bank of England, PRA, FCA and PSR review Memorandum of Understanding in relation to payment systems in the UK

The Bank of England (BoE), the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Payment Systems Regulator (PSR) have a Memorandum of Understanding (MoU) that sets out the high-level framework the Authorities use to cooperate with one another, in relation to payment systems in the UK. The Financial Services (Banking Reform Act) 2013 requires the Authorities to review this MoU annually. The Authorities committed that this review would include feedback from regulated entities, and that a summary of the review’s findings would be published. 2018 saw the third such review.

The BoE’s Deputy Governor for Financial Stability, the FCA Board, the PRA’s Deputy Governor for Prudential Regulation and the PSR Board have reviewed how the MoU is working. They have considered the views of industry and staff, concluding that cooperation and coordination under the MoU is working well. Building on the initiatives identified in the 2017 review and implemented over the last year, the Authorities have identified a number of areas to further deepen cooperation and coordination; these will be implemented over the coming year. In conducting this review, the Authorities emphasised their on-going commitment to working closely together on issues of common regulatory interest and avoiding duplication. The Authorities are also making minor changes to the MoU this year to reflect recent legislative changes or other structural changes, or in relation to those changes. The Authorities will also review the MoU over the next year to ensure it continues to appropriately reflect their respective roles and responsibilities once the United Kingdom has left the EU.

FCA Publishes Annual Report and Accounts 2017/18

July 27, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: annual report, Anti-money laundering, Certification Regime, FCA, Financial Conduct Authority, financial services, financial system, MiFID II, money laundering, PRA, Prudential Regulation Authority

The Financial Conduct Authority (FCA) has today published its Annual Report and Accounts, which looks back on the key pieces of work undertaken by the organisation throughout 2017/18.

Highlights from this year include:

our work to prepare for EU withdrawal
our work to implement major changes to the information and services that consumers can benefit from when they make payments (PSD2) and to transparency and customer protections in the markets for shares, bonds and other financial instruments (MiFID II)
extending the Senior Managers and Certification Regime to non-executive directors and preparing to extend it to all financial services firms
our work on high cost credit and consumer debt
launching a campaign to alert PPI customers to the deadline for complaints about mis-selling

Charles Randell, Chair of the FCA said:

“I am honoured and delighted to have been appointed Chair of the FCA at a time in its history which is both challenging and full of possibilities. I look forward to meeting and working with firms and consumer groups over the coming years.

“This Annual Report shows that keeping pace with the depth and breadth of developments in financial services can be a challenging balancing act. We must act swiftly and decisively to tackle harm to consumers, particularly the most vulnerable. In the process, we have to make some difficult choices, learn from what works and what doesn’t – and be open about both.”

Andrew Bailey, Chief Executive of the FCA said:

“While this Annual Report illustrates the wide range of our activities, there are three key areas that particularly define our work this year.

“The first is our work to prepare for the UK’s withdrawal from the EU.

“The second is regulatory change: this year we have applied legislation which will have profound implications for firms’ transparency, the way they treat consumers and in some cases even their business models. This has included MiFIDII, the second Payment Services Directive and preparing for the extension of the Senior Managers and Certification Regime to all firms.

“And the third area is ensuring that firms treat consumers fairly. Our work this year has sent a clear message to firms that, if they do not treat customers fairly, then we will take action.”

The FCA’s Annual Public Meeting will be held on 11 September at the Queen Elizabeth II Conference Centre in London.

Notes to Editors

The full text of the Annual Report.
The FCA is also today publishing reports on Competition, Diversity and Anti-Money Laundering.
Part of Andrew Bailey’s bonus award for 2017/18 is deferred and will not be paid until next year. Andrew has decided to donate the portion he has already received for 2017/18 to the FCA’s two staff charities, Richard House and the Alzheimer’s Society.
On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
Find out more information about the FCA.

Supervisory Statement; Solvency II: Regulatory Reporting And Exemptions

July 10, 2018 by industryspread Leave a Comment Filed Under: Central Bank Annoucements Tagged: Bank of England, Commission Implementing Regulation, Exemptions, PRA, regulatory reporting, Supervisory Statement

1 Introduction

Update: On 6 July 2016, template reference numbers in Table A were updated to reflect those published in the Commission Implementing Regulation (EU) 2015/2450 of 2 December 2015. There are no changes to the content of Table A.

1.1 This supervisory statement is addressed to all UK Solvency II firms and to Lloyd’s. It should be read alongside all relevant EU legislation, and the Reporting Part of the Prudential Regulation Authority (PRA) Rulebook. It clarifies the PRA’s implementation of the Solvency II regime’s requirements in relation to supervisory reporting.

1.2 In particular, this statement:

Lists the reporting requirements that are subject to this exemption; and
Explains the steps a firm must take to apply for the exemption, and how the decision will
be communicated to the firm.

1.3 This statement expands on the PRA’s general approach as set out in its insurance approach document. By clearly and consistently explaining its expectations of firms in relation to the particular areas addressed, the PRA seeks to advance its statutory objectives of ensuring the safety and soundness of the firms it regulates, and contributing to securing an appropriate degree of protection for policyholders. The PRA has considered matters to which it is required to have regard, and it considers that this statement is compatible with the Regulatory Principles and relevant provisions of the Legislative and Regulatory Reform Act 2006. This statement is not expected to have any direct or indirect discriminatory impact under existing UK law.

1.4 This statement has been subject to public consultation and reflects the feedback that was received by the PRA.

2 Solvency II reporting

2.1 The submission of national specific templates is in addition to those set out in the Solvency II Regulations, and as referred to in Chapter 2 in the Reporting Part of the PRA Rulebook.

2.2 A firm may disclose on a voluntary basis any information or explanation related to its solvency and financial condition which is not already required to be disclosed in accordance with Reporting 3.3–3.8, 4, 5.1, 5.3, 5.4 and 5.5.

3 Scope of quarterly reporting exemption

3.1 The PRA considers that some firms may be eligible for the exemption set out in Article 35(6) of the Solvency II Directive. Specifically, the PRA considers that firms designated as category four and five by the PRA, whether solo or part of a group, may meet the requirements of exemption from quarterly reporting. While the PRA expects that all other firms should report on a quarterly basis, on an exceptional basis it may also consider exemptions for firms not in category four or five on a case-by-case basis. These cases could include small firms that are part of groups where the group is designated as category one, two or three by the PRA.

3.2 The reporting requirements are set out in the Solvency II Regulations and in Reporting 2.1–2.14 in the Reporting Part of the PRA Rulebook. Article 35(6) of the Solvency II Directive states that supervisory authorities may limit reporting with a frequency shorter than one year where ‘submission of that information would be overly burdensome in relation to the nature, scale and complexity of the risks inherent in the business of the undertaking’. This exemption is only available to firms that cumulatively represent less than 20% of a Member State’s life and nonlife insurance and reinsurance market shares respectively.1 On this basis, the PRA has determined that firms designated by the PRA as category four and five, both solo and part of a group, may be eligible for the exemption from quarterly reporting. Other firms may also, exceptionally, be eligible.

3.3 Firms that are granted the solo-level exemption will only have to submit the quarterly reporting templates (QRT) identified in Table A.

3.4 As shown in the table, the exemption from quarterly reporting at the solo level does not apply to:

Minimum capital requirement (MCR) quarterly reporting, as this is a separate requirement
set out in Article 129(4) of the Solvency II Directive;
Second quarter reporting of own funds and balance sheet templates; and
The basic information and content of submission templates.

The latter templates will help the PRA understand basic information about each submission and facilitate validation checks.

3.5 Article 254 of the Solvency II Directive states that the group supervisor may limit reporting with a frequency shorter than a year at the level of the group when all (re)insurance firms within the group benefit from the exemption from quarterly reporting at the solo level. The PRA has determined that groups subject to group supervision by the PRA which meet this criteria set out in Article 254 may be eligible for this exemption from quarterly reporting at the level of the group. Groups that are granted this exemption may not be required to submit any group level quarterly reporting templates.

3.6 The PRA may, where necessary to meet its objectives, make ad hoc requests for quarterly reporting from firms holding an exemption. Firms granted an exemption from quarterly reporting should therefore maintain their ability to respond to such ad hoc requests in a timely manner.

Application for Solvency II quarterly reporting exemptions

3.7 Firms that believe they are eligible for exemptions to quarterly reporting should discuss this exemption with their supervisor prior to submitting a formal application. Similarly, groups subject to group supervision by the PRA that believe they are eligible for exemptions to quarterly reporting at the level of the group should discuss this exemption with their group supervisor prior to submitting a formal application. An application should then be submitted by completing the relevant questionnaire published on the Bank of England website in 2015 Q1. Any applications for quarterly reporting exemptions, either at solo or group level, intended to apply for the 2016 reporting year should be submitted by Tuesday 1 September 2015. Given that the group level reporting exemption may only be granted once all solo firms within a group have been granted the solo level exemption, the timing of decisions on the two types of applications may differ.

3.8 Once the PRA has assessed an application it will inform the firm of its decision. Where an application is approved, the firm will be sent a Direction letter that sets out the duration of the exemption. The PRA expects firms to have a contingency plan in place in case their application is rejected and maintain contingency plans in case the exemption should expire without being extended. The PRA expects firms to notify their supervisory contact as soon as they believe there are any circumstances which may impact their suitability to hold an exemption.

4 Cost benefit analysis

4.1 The PRA regards the costs are proportionate to the benefits as the impact on policyholder protection is likely to be minimal. The PRA would still receive sufficient information to enable a proportionate level of supervision but with lower administrative compliance costs for exempted firms.

FCA Releases Algo-Trading Report

February 13, 2018 by Karthik Subramanian Leave a Comment Filed Under: Industry News Tagged: algorithmic trading, FCA, Industry Report, MiFID II, PRA

The UK’s financial market regulator, the Financial Conduct Authority (FCA), yesterday released a detailed report on the supervision of algorithmic trading including new requirements under the MiFID II guidelines. The report touches on the key issues of emphasis and good and bad practices observed within cross-firm reviews.

The introduction of automated trading technology has brought significant benefits to investors, with increased execution speed and lower costs. However, it has also introduced a certain degree of risk in terms of compliance and management. It is therefore essential to have oversight functions in place to keep pace with the technological advancement in algo-trading – a double-edged sword in the trading world. The absence of any such systems and controls can turn a manageable error into an extreme event, possibly affecting millions of other investors.

Consequently, the FCA has initiated a detailed report to explore this area – an area that has gained prominence with the advancement of trading technologies within the industry. Megan Butler, Director of Supervision, Investment, Wholesale at the FCA, said in the report:

This report is relevant for all firms developing and using algorithmic trading strategies in wholesale markets. Firms should consider and act on its content in the context of good practice for their business.

The report focuses on the five key areas within algorithmic trading compliance in the wholesale markets: Defining Algorithmic Trading, the Development and Testing Process, Risk Controls, Governance and Oversight, and Market Conduct. The report also includes a detailed assessment of procedures used by firms involved in algorithmic trading, their front line staff, including traders, research analysts, and software developers.

Overall, the report presents a positive attitude from those within the industry towards the need for measures to reduce the potential risks in algorithmic trading. The report also suggests that staff involved in the development and implementation processes should undergo “market-abuse training” as a means of reducing potential conduct risks.

The FCA also highlights a number of key requirements firms need to be particularly aware of in order to comply with the MiFID II guidelines. These includes emergency “kill functionality” to cancel all unexecuted orders with immediate effect, a robust trading system to prevent incorrect orders contributing to a disorderly market, and business continuity arrangements to deal with system failures.

The Prudential Regulation Authority (PRA) has also released a consultation paper on the subject, covering the governance and risk management of algorithmic trading. The FCA and PRA will continue to work closely together going forward.

July 2019 meeting

MoU on trade repositories

MoU on AIFs

Equivalence decisions

Background

Notes to editors

1 Introduction

2 Implications of UK branches becoming third country branches

3 Split of responsibilities between PRA and SSM

4 Conclusion

This supervisory statement sets out the Prudential Regulation Authority’s (PRA) expectations in respect of the reporting of sensitivities of solvency position to various changes in market risk.

1 Introduction

2 Solvency II reporting

3 Scope of quarterly reporting exemption

4 Cost benefit analysis

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