Operating the Interim Capital Regime

As announced in its concurrently published policy statement (PS17/23) (see EventID 24391), the Prudential Regulation Authority (PRA) has now issued a new near final statement of policy (SoP) on the operation of the Interim Capital Regime (ICR) – particularly as it relates to „simpler-regime firms“ or better „Small Domestic Deposit Takers“ (SDDTs).
To recapture, the noted policy statement permits SDDTs and consolidated group SDDTs to apply for the application of the interim capital regime (ICR) that was put in place following Brexit for smaller CRR firms, until the new capital requirements regulations and the simpler CRR firms regime come into force. The PRA has now published this statement of policy to outline:
– how firms categorized as SDDTs may access the ICR regime (upon application with the PRA, the PRA would „modify“ the definition of an „ICR firm“ just for the purpose of including the individual applicant SDDT);
– circumstances which may cause the PRA to remove (consolidated) SDDTs from the regime, e.g. if the PRA concludes that the risks posed by an SDDT are beyond those for which the ICR was designed for;
– the treatment of firms that operate under the ICR, but subsequently merge with other institutions including foreign ones, in terms of net asset thresholds to qualify for the ICR; and
– the expectations of a firm participating in the ICR that no longer qualifies for such which primarily includes that the affected firm notifies the PRA of this circumstance. Subsequently, the PRA will re-modify its „definition“ (as stated above) and expect the firm to comply with the Basel 3.1 requirements.