Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to:

1. (1) a CRR firm in relation to its:
1. (a) UK activities; and
2. (b) [deleted.]
3. (c) other activities wherever they are carried on, in a prudential context; and
2. (2) a third country CRR firm in relation to its activities carried on from an establishment in the UK.

1.2

This Part applies:

1. (1) in relation to regulated activities;
2. (2) in relation to the regulated activity, specified in Article 14 of the Regulated Activities Order (Dealing in investments as principal), disregarding the exclusion in Article 15 of the Regulated Activities Order (Absence of holding out etc.);
3. (3) in relation to ancillary activities and (in relation to MiFID business) ancillary services;
4. (4) in relation to the carrying on of unregulated activities in a prudential context; and
5. (5) taking into account activities of other members of a group of which the firm is a member.

1.3

(1) In this Part, the following definitions shall apply:

accounting reference date

means

1. (1) (in relation to a body corporate incorporated in the UK under the Companies Acts) the accounting reference date of that body corporate determined in accordance with section 391 of the Companies Act 2006; or
2. (2) (in relation to any other body) the last day of its financial year.

average total assets

means the recent average of the firm’s total assets calculated as follows:

1. (1) for a CRR firm:     
   1. (a) identify the occasions (due dates) in the preceding 36 months by which the firm was required to report its total assets; and
   2. (b) calculate the arithmetic mean of the total assets that the firm was required to report on those occasions; or
2. (2) for a third country CRR firm, calculate the arithmetic mean of the firm’s total assets on each of the last three accounting reference dates.

business unit

means any separate organisational or legal entities, business lines, or geographical locations.

buy-out

means that part of an employee’s variable remuneration:

1. (a) agreed in any contracts relating to the commencement of employment with, or provision of services to, a new firm; and
2. (b) the aggregate value of which is less than or equal to such unvested variable remuneration:
1. (i) in the employee’s contracts relating to the employee’s employment with, or provision of services to, a previous firm, and
2. (ii) which terminated when the employee left employment with, or ceased to provide services to, the previous firm.

buy-out notice

means the information provided by a firm to a previous firm in accordance with 15A.5.

consolidation group entity

means an institution or financial institution which is:

1. (1) an undertaking responsible for consolidation;
2. (2) a subsidiary of the undertaking responsible for consolidation; or
3. (3) where the consolidation group contains a PRA designated institution, a subsidiary of the UK parent financial holding company or UK parent mixed financial holding company by which the PRA designated institution is controlled.

control functions

means a function that is independent from the business units it controls and that is responsible for providing an objective assessment of the firm's risks or to review or report on those and which includes (but is not limited to) the risk management function, the compliance function and the internal audit function.

core business line

means business lines and associated services which represent material sources of revenue, profit or franchise value for a firm or for its group.

CRR2

means Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019.

group

has the meaning in section 421 FSMA.

high earner

means an employee (of a firm or of any consolidation group entity) whose total annual remuneration is €1 million or more per year or its equivalent in another currency determined by reference to the conversion rate applicable to the corresponding High Earners Report under Chapter 18.

High Earners Report

means the report by which a firm provides to the PRA the information required in Chapter 18.

higher paid material risk taker

means a material risk taker:

1. (a) whose annual variable remuneration exceeds 33% of their total remuneration, or
2. (b) whose total remuneration exceeds £500,000.

large institution

has the meaning provided in point 146 of Article 4 of the CRR.

managerial responsibility

means a situation in which an employee:

1. (1) heads a business unit or a control function and is directly accountable to the management body as a whole or to a member of the management body or to the senior management;
2. (2) heads one of the functions set out in 3.2A(1) or
3. (3) heads a subordinated business unit or a subordinated control function in a large institution and reports to an employee that has the responsibilities referred to in (1).

material business unit

means a business unit that meets either of the following criteria:

1. (a) it has allocated internal capital of at least 2% of the internal capital of the firm as set out in Internal Capital Adequacy Assessment Part 3.1(1) or is otherwise assessed by the firm as having a material impact on the firm’s internal capital; or
2. (b) it is a core business line.

material risk taker

has the meaning given in 3.1.

private person

has the meaning given by regulation 3 of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001.

reduction notice

means a notice provided to a firm by a previous firm in accordance with 15A.9(3).

Remuneration Benchmarking Information Report

means the report by which a firm provides to the PRA the information required in Chapter 17.

remuneration requirements

means the requirements in 6 to 15A.

remuneration statement

means a statement provided to an employee by a previous firm in accordance with 15A.7.

share

means the investment specified in Article 76 of the Regulated Activities Order (Shares etc).

significant firm

means a firm which is significant in terms of its size, internal organisation and the nature, scope and complexity of its activities.

small CRR firm

means a CRR firm that satisfies Condition 1 and, where the firm is part of a group containing any other firm subject to this Part on an individual basis, Condition 2, where:

1. (1) Condition 1 is that the firm either:
1. (a) has average total assets not exceeding £4 billion; or
2. (b) satisfies the conditions in 2A.1 and has average total assets exceeding £4 billion but not exceeding £20 billion;
2. and
3. (2) Condition 2 is that where the firm is a member of a group, the criteria in (a) or (b) are satisfied in respect of any other firm in the group which is subject to this Part on an individual basis:
1. (a)
   1. (i) the average total assets of each CRR firm in the group do not exceed £4 billion on an individual basis;
   2. (ii) the average total assets relating to the activities of the branch operation in the UK of each third country CRR firm in the group do not exceed £4 billion on an individual basis; and
   3. (iii) where any CRR firm or third country CRR firm in the group is a member of a consolidation group, the consolidation group has average total assets not exceeding £4 billion on a consolidated basis; or
2. (b) 
   1. (i) the average total assets of each CRR firm in the group do not exceed £20 billion on an individual basis;
   2. (ii) the average total assets relating to the activities of the branch operation in the UK of each third country CRR firm in the group do not exceed £20 billion on an individual basis;
   3. (iii) where any CRR firm or third country CRR firm in the group is a member of a consolidation group, the consolidation group has average total assets not exceeding £20 billion on a consolidated basis 
   4. (iv) for each CRR firm in the group each of the conditions in 2A.1 are satisfied on an individual basis;
   5. (v) for each third country CRR firm in the group each of the conditions in 2B.1 are satisfied on an individual basis; and
   6. (vi) where any CRR firm or third country CRR firm in the group is a member of a consolidation group, each of the conditions (1), (2) and (3) in 2A.1 are satisfied in respect of the consolidation group on a consolidated basis,

provided that, if a firm has not yet been required to report its total assets, the calculations in respect of average total assets in Conditions 1 and 2 shall instead be done on the basis of the firm's reasonable forecast of its total assets as at the first occasion on which it will be required to report them.

small third country CRR firm

means a third country CRR firm that satisfies Condition 1 and, where the firm is part of a group containing any other firm subject to this Part on an individual basis, Condition 2, where 

1. (1) Condition 1 is that the firm either:
1. (a) has average total assets that relate to the activities of the branch operation of the firm in the UK not exceeding £4 billion; or;
2. (b) satisfies the conditions in 2B.1 and has average total assets that relate to the activities of the branch operation of the firm in the UK exceeding £4 billion but not exceeding £20 billion;
2. and
3. (2) Condition 2 is that where the firm is a member of a group, the criteria in (a) or (b) are satisfied in respect of any other firm in the group which is subject to this Part on an individual basis:
1. (a)
   1. (i) the average total assets of each CRR firm in the group do not exceed £4 billion on an individual basis;
   2. (ii) the average total assets relating to the activities of the branch operation in the UK of each third country CRR firm in the group do not exceed £4 billion on an individual basis; and
   3. (iii) where any CRR firm or third country CRR firm in the group is a member of a consolidation group, the consolidation group has average total assets not exceeding £4 billion on a consolidated basis; or
2. (b) 
   1. (i) the average total assets of each CRR firm in the group do not exceed £20 billion on an individual basis;
   2. (ii) the average total assets relating to the activities of the branch operation in the UK of each third country CRR firm in the group do not exceed £20 billion on an individual basis;
   3. (iii) where any CRR firm or third country CRR firm in the group is a member of a consolidation group, the consolidation group has average total assets not exceeding £20 billion on a consolidated basis; 
   4. (iv) for each CRR firm in the group each of the conditions in 2A.1 are satisfied on an individual basis;
   5. (v) for each third country CRR firm in the group each of the conditions in 2B.1 are satisfied on an individual basis; and
   6. (vi) where any CRR firm or third country CRR firm in the group is a member of a consolidation group, each of the conditions (1), (2) and (3) in 2A.1 are satisfied in respect of the consolidation group on a consolidated basis, 

provided that, if a firm has not yet been required to report its total assets, the calculations in respect of average total assets in Conditions 1 and 2 shall instead be done on the basis of the firm’s reasonable forecast of its total assets as at the first occasion on which it will be required to report them.

small trading book

means the size of the firm’s (or for the purposes of a small third country CRR firm, the size relating to the activities of the branch operations in the UK of the firm) on- and off-balance-sheet trading-book business is equal to or less than both:

1. (a) 5% of the firm’s total assets; and
2. (b) €50 million

on the basis of the assessment provided in Article 94 of the CRR, as amended by point (48) of Article 1 of CRR2.

total assets

means:

1. (1) in relation to a CRR firm, its total assets as set out in its balance sheet on the relevant accounting reference date; and
2. (2) in relation to a third country CRR firm, the total assets of the third country CRR firm as set out in its balance sheet on the relevant accounting reference date that cover the activities of the branch operation in the UK;

except that, for the purpose of identifying whether a firm is a small CRR firm and calculating the average total assets for that purpose, it means:

1. (3) for a firm that is required to submit data item template F 01.01 of Annex III Part 1 of Reporting (CRR) Part, the sum of the firm’s assets as required to be recorded at row 380 of that data item; or
2. (4) for a firm that is required to submit data item template F 01.01 of Annex IV Part 1 of Reporting (CRR) Part, the sum of the firm’s assets as required to be recorded at row 380 of that data item.

undertaking responsible for consolidation

 

means a PRA approved parent holding company, a PRA designated parent holding company, a PRA approved intermediate holding company, a PRA designated intermediate holding company, or a PRA designated institution.

(2) In this Chapter, references to rules in 15 in relation to a firm shall be read on the basis that references to employment with or the provision of services to the firm, include references to employment with or the provision of services to a previous firm to which the buy-out relates.

[Note: CRD]

1.4

Unless otherwise defined, any italicised expression used in this Part and in the CRD or CRR has the same meaning as in the CRD or CRR.

[Note: CRD and CRR]