PRA Regulatory Digest – November 2023

The Prudential Regulation Authority (PRA) has published the latest version of its monthly regulatory digest (November 2023). The digest outlines the Authority’s ongoing regulatory activities ranging from the launch of consultations, to the issuance of policy statements, to the implementation of regulatory changes and provides links to corresponding (legal) documents. The regulatory digest presents a viable source of information to stay up-to-date on regulatory issues and to ensure preparedness for upcoming changes as it furnishes a briefly summarized overview of all relevant ongoing issues. This latest version presents the following highlights, among others:
(1) The launch of joint consultation (CP25/23) as regards the replacement of the „EU guidelines regarding the assessment of acquisitions in the financial sector“. The mentioned guidelines set out the procedures to be followed and the criteria to be considered in evaluating acquisitions and large position increases for purposes of determining whether or not such acquisitions or increases in holdings should be permitted. Among others, the replacement would involve the creation of a new supervisory statement by PRA and new guidance by the FCA and the elimination of related sections in the FCA Handbook and website. The revised guidelines retain much of the EU guidelines, but introduce certain modifications, including provisions for conditional approvals, different criteria for determining „significant influence“, alterations in aggregating indirect holdings, and revised procedures for submitting notifications, allowing for additional information requests in complex cases. The consultation will run through February 23, 2024 (please see EventID #24143 in this context for more information).
(2) The launch of consultation (CP24/23) as regards a proposed new supervisory statement concerning funded reinsurance in the UK life insurance sector. The statement would thereby address concerns about risks stemming from increased use of funded reinsurance arrangements, including the potential for excessive concentration among reinsurers, complexity in these arrangements, and oversight challenges. The policy statement would focus on three key issues in this context, including ongoing risk management of funded reinsurance arrangements, the modelling of corresponding solvency capital requirements, and the consideration of risk in such arrangements. The consultation will run through February 16, 2024 (please see EventID #24061 in this context for more information).
(3) The issuance of discussion paper (DP2/23) to explore the possibility of increasing Financial Services Compensation Scheme protection (to 100%) for certain types of General Insurance. The discussion paper follows an emergency policy statement in October 2020, which raised FSCS protection for eligible policyholders of buildings guarantee insurance from 90% to 100%. In its discussion paper, the PRA presents general insurance products where a coverage of less than 100% may have significant impacts upon policy holders and sorts out various alternatives how to go about further FSCS protection for such products. The paper also addresses the definition of „small business“ in policyholder protection which only permits the smallest of all businesses to receive claims from an FSCS in case of the failure of an insurance undertaking. The consultation will run through January 24, 2024 (please see EventID #23714 in this context for more information).
(4) The issuance of policy statement (PS14/23) which removes the Common Equity Tier 1 (CET1) deduction requirement for non-performing exposures (NPEs) that aren’t adequately accounted for and removes or modifies corresponding reporting templates to be filed by institutions. The policy statement came into force on November 14, 2023 (please see EventID #23873 in this context for more information).
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For more detailed, comprehensive information, please refer to the enclosed Digest.