Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to a ring-fenced body.

1.2

In this Part, the following definitions shall apply:

arm’s length policy

means the policy established in accordance with 12.2.

arm’s length procedures

means the procedures established in accordance with 12.2.

central securities depository

has the meaning set out in Article 2.1(1) of Regulation (EU) No 909/2014, and includes a ‘securities settlement system’ as defined in that regulation.

close family tie

means a relationship:

1. (1) of marriage or civil partnership; or
2. (2) which has the characteristics of a relationship of marriage or of civil partnership; or
3. (3) between a person referred to in 1.3(2)(d) and his or her parent, sibling, child, grandparent or grandchild, including a step-relationship in each case.

common equity tier 1 capital ratio

has the meaning in Article 92(2)(a) of the CRR.

collateral exception

means:

1. (1) in relation to an excluded activity, the exception provided for in Article 6(3)(b) of the Excluded Activities and Prohibitions Order; or
2. (2) in relation to a prohibition, the exception provided for in Article 14(5) of the Excluded Activities and Prohibitions Order.

collateral exceptions policy

means a policy document setting out in detail how a ring-fenced body makes use of the collateral exceptions and which meets the requirements of 17.

collateral exception transaction

means a transaction entered into by making use of a collateral exception.

conduit vehicle

has the meaning in Article 1 of the Excluded Activities and Prohibitions Order.

distribution

has the meaning in section 829 of the Companies Act 2006.

exception

means:

1. (1) the hedging exception;
2. (2) the liquid asset exception; and
3. (3) the collateral exception.

exceptions policy

means:

1. (1) the hedging exceptions policy;
2. (2) the liquid asset exceptions policy; and
3. (3) the collateral exceptions policy.

exception transaction

means a transaction entered into in accordance with any of the following:

1. (1) hedging exception;
2. (2) liquid asset exception; and
3. (3) collateral exception.

extraordinary vacancy

means a vacancy on the governing body of a ring-fenced body arising from the resignation, dismissal or death of an independent non-executive director before the expiry of his or her term of appointment as a director.

FMI

means any of the following: an interbank payment system, a central securities depository or a central counterparty.

group services entity

in relation to a ring-fenced body, means an entity within the same group as the ring-fenced body, whose only business is to provide services or facilities to any other person.

hedging exception

means:

1. (1) in relation to an excluded activity, the exception provided for in Article 6(1) of the Excluded Activities and Prohibitions Order; or
2. (2) in relation to a prohibition, the exception provided for in Article 14(2) of the Excluded Activities and Prohibitions Order.

hedging exceptions policy

means a policy document setting out in detail how a ring-fenced body makes use of the hedging exceptions and which meets the requirements of 17.

hedging exception transaction

means a transaction entered into in accordance with a hedging exception.

income-dependent

means a state in which the ring-fenced body would be unable to continue to carry on core activities if income to the ring-fenced body or any member of the sub-consolidation group were to reduce as a result of the acts, omissions or insolvency of a member of the ring-fenced body’s group that is not a ring-fenced affiliate.

interbank payment system

has the meaning in Article 13(11) of the Excluded Activities and Prohibitions Order.

intragroup transaction

has the meaning in Article 3 of Regulation (EU) No 648/2012.

liquid asset exception

means:

1. (1) in relation to an excluded activity, the exception provided for in Article 6(3)(a) of the Excluded Activities and Prohibitions Order; or
2. (2) in relation to a prohibition, the exceptions provided for in Article 14(3A) and Article 18(b) of the Excluded Activities and Prohibitions Order.

liquid asset exceptions policy

means a policy document setting out in detail how a ring-fenced body makes use of the liquid asset exceptions and which meets the requirements of 17.

liquid asset exception transaction

means a transaction entered into in accordance with a liquid asset exception.

participant

has the meaning set out in Article 2.1(19) of Regulation (EU) No 909/2014.

permitted supplier

means a person that provides services or facilities to any other person and that is:

1. (1) a group services entity; or
2. (2) a ring-fenced affiliate.

prohibition

means a prohibition imposed under the Excluded Activities and Prohibitions Order.

related undertaking

has the meaning in Article 1(4) of the Excluded Activities and Prohibitions Order.

relevant person

means:

1. (1) a ring-fenced body;
2. (2) any other firm that is a member of a sub-consolidation group; or
3. (3) a ring-fenced holding company.

ring-fenced affiliate

means:

1. (1) in relation to a ring-fenced body, any member of the sub-consolidation group of which the ring-fenced body is a member, other than the ring-fenced body itself; and
2. (2) in relation to a relevant person, any member of the sub-consolidation group of which the relevant person is a member, other than the relevant person itself.

ring-fencing obligation

means any obligation, prohibition or other requirement imposed on a ring-fenced body by or under FSMA by virtue of it being a ring-fenced body, including any statutory instrument made under FSMA and any ring-fencing rule, but not including any rule made by the FCA.

shared collateral

means collateral on which both the ring-fenced body and a member of its group that is not a ring-fenced affiliate have a claim.

specified factor

means:

1. (1) in relation to an excluded activity, any of the factors set out in Article 6(2) of the Excluded Activities and Prohibitions Order; or
2. (2) in relation to a prohibition, any of the factors set out in Article 14(3) of the Excluded Activities and Prohibitions Order.

sponsored structured finance vehicle

has the meaning in Article 1 of the Excluded Activities and Prohibitions Order.

tier 1 capital ratio

has the meaning in Article 92(2)(b) of the CRR.

total capital ratio

has the meaning in Article 92(2)(c) of the CRR.

transaction

includes any contract, transaction, or arrangement, which may or may not contain contractual terms.

1.3

For the purposes of this Part:

1. (1) a director is regarded as independent if he or she is not disqualified by virtue of falling within any of 1.3(2)(a) to (h).
2. (2) a director is not regarded as independent if he or she:
1. (a) has been an employee of the ring-fenced body or of any other member of its group within the period of five years before his or her appointment as a director (but a non-executive director is not to be regarded as an employee for this purpose);
2. (b) has, or has had, within the period of three years before appointment, a material business relationship with the ring-fenced body or any other member of its group either directly, or as a partner, shareholder, director or as a member of senior management or equivalent of an undertaking that has such a relationship with the ring-fenced body or other member of its group, as the case may be;
3. (c) has received or receives fixed or variable remuneration from the ring-fenced body or any other member of its group, other than a director’s fee or remuneration attributable to a period of service that concluded five years before his or her appointment as a director;
4. (d) has a close family tie with any of the following:
1. (i) an individual who provides or has provided professional or business advice (whether in his or her individual capacity or otherwise) to the ring-fenced body or any other member of its group;
2. (ii) a director of the ring-fenced body or of any other member of its group; or
3. (iii) a member of senior management or equivalent of the ring-fenced body or of any other member of its group;
5. (e) holds a directorship in any other undertaking that is not a member of the ring-fenced body’s group of which any other director of the ring-fenced body is also a director;
6. (f) has a link, of a nature that might reasonably be expected to give rise to a conflict that is to be identified under 3.2, with any other director of the ring-fenced body through involvement in any other undertaking that is not a member of the ring-fenced body’s group;
7. (g) can reasonably be identified as representing or otherwise associated with the interests of a particular shareholder or shareholders of a parent undertaking of the ring-fenced body where that shareholder is or those shareholders are able to exercise significant influence over the management of the parent undertaking; or
8. (h) has served on the governing body of the ring-fenced body or of any other member of its group for more than nine years from the date of first election.

1.4

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