PRA Regulatory Digest - April 2024

Top news and publications

• Policy statement 7/24 - Securitisation: General requirements
• Consultation paper 4/24 - Regulated fees and levies: Rates proposals for 2024/25
• Prudential Regulation Authority Business Plan 2024/25
• Consultation paper 5/24 - Review of Solvency II: Restatement of assimilated law

News and speeches

Letter from Rebecca Jackson and Charlotte Gerken: Thematic review of private equity related financing activities

23 April

Letter to Chief Risk Officers (CROs) of banks operating in the UK following the Prudential Regulation Authority's (PRA) thematic review of private equity financing businesses.

Letter from Rebecca Jackson and Charlotte Gerken: Thematic review of private equity related financing activities

Private equity financing − speech by Rebecca Jackson

23 April

The private equity market has grown considerably over the past decade, and with it, Banks' exposures to the sector have also grown considerably. The PRA recently concluded a thematic review of firms' private equity financing risk management frameworks. In this speech, Rebecca Jackson sets out the review's findings, and highlights a number of gaps in firms' risk management frameworks.

Private equity financing − speech by Rebecca Jackson

The Bank and the PRA's response to DSIT/HMT: update on our approach to AI

22 April

This update is published in response to the DSIT Secretary of State and Economic Secretary to the Treasury and City Minster's request for an update on the Bank and PRA' s strategic approach to AI. As the Government's AI White Paper sets out, AI/ML are rapidly developing technologies with the potential to enhance the financial services sector in the UK and globally. To support the safe adoption of AI/ML, we have been working to explore the adoption and use of these technologies by financial services firms, and their potential implications for our statutory objectives and regulatory framework, which we outline in more detail in this update.

The Bank and the PRA's response to DSIT/HMT: update on our approach to AI

Update on the Bank of England and Financial Conduct Authority Memorandum of Understanding

19 April

The Memorandum of Understanding sets out the high-level framework the Bank of England and the Financial Conduct Authority will use to co-ordinate and co-operate in carrying out their respective responsibilities

MoU between the FCA and the Bank of England

PRA Business Plan

11 April

The 2024/25 Business Plan sets out the workplan for each of our strategic priorities to support the delivery of the PRA's strategy, together with an overview of the PRA's budget for 2024/25.

Prudential Regulation Authority Business Plan 2024/25

Transforming Data Collection (TDC) programme - Industry cost survey

Over the past three years, the Bank of England (the Bank) and the Financial Conduct Authority (FCA) have been working together, as part of a joint transformation programme, towards achieving the vision set out in the 2021 Transformation Plan, that 'Regulators get the data they need to fulfil their mission, at the lowest cost to the industry'. Building on the learnings from the joint transformation programme, the Bank and FCA are planning several projects and undertaking a range of specific workstreams over the next 18 months to improve data collection that will contribute to our longer-term plans for transformation.

For the Bank to measure the future cost saving benefits of our internal TDC programme to industry, we need to understand the current cost baseline and the potential for future savings. Whilst the information being requested is similar to that of the 2021 cost survey for Basel 3.1, the TDC cost survey is building on this work and is much broader in scope.

The survey requests business as usual and change costs, with change costs being an average annual cost over the last five years. The survey is voluntary and should be completed on a best endeavours basis. All firms in scope for the survey will receive an email via your usual supervisory contact.

Cross cutting publications and updates

PS7/24 - Securitisation: General requirements

30 April

This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses the PRA received to consultation paper (CP) 15/23 - Securitisation: General requirements. It also contains the PRA's final policy, as follows:

• a new Securitisation Part of the PRA Rulebook (together with consequential amendments to the Liquidity Coverage Ratio (CRR) Part and the Non-Performing; Exposures Securitisation (CRR) Part of the PRA Rulebook) (Appendices 1 and 2); and
• an updated PRA supervisory statement (SS) 10/18 - Securitisation: General requirements and capital framework (Appendix 3).

This PS is relevant to all categories of PRA-authorised persons who are established in the UK, including CRR firms, Solvency II firms, non-CRR firms, and non-Solvency II firms. It is also relevant to qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms, and financial institutions that are subsidiaries of these firms. It is not relevant to non-UK firms with branches in the UK.

PS7/24 - Securitisation: General requirements

CP6/24 - Occasional consultation paper: April 2024

30 April

This consultation paper (CP) sets out the Prudential Regulation Authority's (PRA) proposals to make minor amendments to PRA rules and to add a new rule to the Policyholder Protection Part of the PRA Rulebook. Also included are joint PRA and Financial Conduct Authority (FCA) proposals to make amendments to technical standards relating to risk mitigation techniques for over-the-counter (OTC) derivative contacts not cleared by a central counterparty.

The proposals in this CP would:

• amend the Disclosure (CRR) Part of the PRA Rulebook;
• amend the Reporting (CRR) Part of the PRA Rulebook:
• amend Regulatory Reporting Part of the PRA Rulebook;
• amend the Glossary of the PRA rulebook;
• add a new Rule 9.5A to the Policyholder Protection Part of the PRA Rulebook (Policyholder Protection); and
• amend Binding Technical Standards (BTS) 2016/2251.

CP6/24 - Occasional consultation paper: April 2024

CP4/24 - Regulated fees and levies: Rates proposals for 2024/25

11 April

This consultation paper (CP) sets out proposals for the Prudential Regulation Authority's (PRA) fees for 2024/25. The proposals would make amendments to the Fees Part of the PRA Rulebook (Appendix). The proposals include:

• the fee rates to meet the PRA's 2024/25 Annual Funding Requirement (AFR);
• changes to the internal model application fees, the model maintenance fee and the fee payable for insurance business transfers under Part VII FSMA;
• setting out how the PRA intends to allocate the surplus from the 2023/24 AFR (Chapter 3); and
• the retained penalties for 2023/24 (Chapter 4).

This CP is relevant to all firms that currently pay PRA fees or are expecting to do so within the 2024/25 fee year.

CP4/24 - Regulated fees and levies: Rates proposals for 2024/25

Insurance publications and updates

Bank of England Insurance Taxonomy v2.0.0

29 April

The PRA published the Bank of England Insurance taxonomy v2.0.0, setting out the technical implementation of the requirements outlined in PS3/24 - Review of Solvency II: Reporting and disclosure phase 2 near-final. An updated XBRL filing manual has been published to help firms and software vendors when preparing to report.

Regulatory reporting - insurance sector

CP5/24 - Review of Solvency II: Restatement of assimilated law

22 April

This consultation paper (CP) is the final PRA consultation needed to implement the conclusions of the Solvency II Review and to finalise PRA rules and other policy materials that will replace Solvency II assimilated law which is being revoked by the Government under its Smart Regulatory Framework (SRF) programme. It represents an important step in completing the adaptation of the UK's prudential regime for insurers inherited from the European Union (EU) into a framework consistent with the UK's approach to financial services regulation.

This CP proposes the restatement into PRA policy material of those parts of the Solvency II regime which have not already been subject to consultation as part of the Solvency II Review. It sets out how the PRA proposes to restate these Solvency II requirements from assimilated law into the PRA Rulebook and other policy material such as Supervisory Statements (SSs) or Statements of Policy (SoPs) ('PRA policy material').

CP5/24 - Review of Solvency II: Restatement of assimilated law | Bank of England

Solvency II Review - Matching adjustment reform implementation considerations for 30 June 2024

15 April

The PRA is issuing this update to respond to clarifications requested by firms in their responses to its consultation paper 'Review of Solvency II: Reform of the Matching Adjustment', and to assist relevant insurance firms to prepare for implementation of the matching adjustment reforms in a way that makes efficient use of resources and allows firms to make the most of new investment opportunities facilitated by the reforms.

Solvency II Review - Matching adjustment reform implementation considerations for 30 June 2024

More information

Bank Underground - a blog for Bank of England staff to share views that challenge - or support - prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England or its policy committees.

Bank Overground - the purpose of Bank Overground is to share our internal analysis. Each bite-size post summarises a piece of analysis that support a policy or operational decision.

Explainers - from interest rates and inflation through to bank failures and financial crises, Explainers uses everyday examples and engaging visuals to bring economics to life.

European and International developments - readers are referred to the following websites: