PRA Regulatory Digest – September 2023

The Prudential Regulation Authority (PRA) has published the latest version of its monthly regulatory digest (September 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 consultation (CP18/23), a joint consultation of the PRA and the FCA, as regards the introduction of a new regulatory framework for „Diversity and Inclusion“ in supervised firms. The key elements of the proposed framework include the requirement of firms to establish and publish a D&I strategy, the requirement of risk and control functions within firms to aid firms in their D&I strategy and ensure compliance with such, the requirement of firms to set diversity targets, and the requirement to produce annual reports and make corresponding disclosures on diversity and inclusion issues, including workforce composition and employee satisfaction. Additionally, the regulators aim to address non-financial misconduct, such as harassment and discrimination, in their assessment of firms‘ suitability for operation in UK, in Boards and senior managers fit and proper assessments, and in their respective conduct rules. The consultation will run through December 18, 2023 (please see EventID #23093 in this context for more information).
(2) The launch of consultation (CP19/23) as regards reforms to the „Matching Adjustment (MA)“. In it, the PRA proposes targeted amendments to the MA aimed at enhancing flexibility of insurance undertakings while maintaining high prudential standards. Among others, the PRA seeks to allow investments in assets with highly predictable cash flows, expand eligibility for liabilities, streamline the MA application process, make regulatory treatment of MA breaches more proportionate, introduce new attestation requirements for senior managers, and improve risk management by assessing asset credit quality more granularly. Additionally, a new reporting requirement would be introduced to standardize data submission on MA assets and liabilities. The consultation will run through January 5, 2024 (please see EventID 23261 in this context).
(3) The launch of consultation (CP20/23) as regards a proposed new rule to ensure that Ring-Fenced Bodies (RFBs), which are financial firms with ring-fencing arrangements, do not pose undue risks to their stability and core services in the UK when operating internationally. This rule would require RFBs to ensure that their subsidiaries and branches in third countries do not present a significant risk to their ability to provide core services in the UK. Additionally, the PRA proposes to revise its Supervisory Statement SS8/16 to specify expectations for RFBs operating in third countries. These expectations include disclosure requirements for RFBs with non-UK subsidiaries or branches, considerations about the supervisory regime in host countries, and assessments of resolvability issues for these entities. The PRA also plans to make minor technical changes to the supervisory statement. The consultation will run through November 27, 2023 (please see EventID 23221 in this context).
(4) The issuance of policy statement (PS12/23) as regards an adequate legal framework for „insurers in financial difficulties“ as required by the „Financial Services and Markets Act 2023“. In this policy statement, the PRA briefly describes the responses it has received to its consultation, the changes it has made to its draft framework, and the final rules and Statement of Policies as they will apply from September 19, 2023. The final framework thereby specifies the operation of the Financial Services Compensation Scheme in case of write-downs, the notification requirements of insurers with respect to policy holders after a write-down order has been effected before court, and the expectations of the PRA as regards the application for a write-down and the appointment of a write-down manager. Please see EventID 22996 in this context for more information.
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For more complete, detailed information, please refer to the enclosed Digest.