PRA CP18/17, FCA CP17/34: Occasional Consultation Paper

1 Consultation Paper |PRA CP18/17 FCA cp17 /34 Occasional Consultation Paper October 2017 prudential Regulation authority 20 Moorgate London EC2R 6DA Consultation Paper | Occasional Consultation Paper October 2017 The Bank of England and the prudential Regulation authority (PRA) reserve the right to publish any information which it may receive as part of this Consultation . Information provided in response to this Consultation , including personal information, may be subject to publication or release to other parties or to disclosure, in accordance with access to information regimes under the Freedom of Information Act 2000 or the Data Protection Act 1998 or otherwise as required by law or in discharge of the PRA s statutory functions. Please indicate if you regard all, or some of, the information you provide as confidential.

2 If the Bank of England or the PRA receives a request for disclosure of this information, the Bank of England or the PRA will take your indication(s) into account, but cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system on emails will not, of itself, be regarded as binding on the Bank of England and the PRA. Responses are requested for: Tuesday 17 October 2017 for the administration instrument (Appendix 15); Friday 3 November 2017 for Chapters 7 and 8; Tuesday 9 January 2018 for Chapters 2 6, 9 and 10. Please address any comments or enquiries to: Policy Implementation Team prudential Regulation authority 20 Moorgate London EC2R 6DA Email: The Financial Conduct authority (FCA) makes all responses to formal Consultation available for public inspection unless the respondent requests otherwise.

3 The FCA will not regard a standard confidentiality statement in an email message as a request for non-disclosure. Despite this, the FCA may be asked to disclose a confidential response under the Freedom of Information Act 2000. The FCA may consult respondents if it receives such a request. Any decision the FCA makes not to disclose the response is reviewable by the Information Commissioner and the Information Rights Tribunal. All FCA publications are available to download from To receive this Paper in an alternative format, please call 020 7066 0790 or email: or write to: Editorial and Digital team, Financial Conduct authority , 25 The North Colonnade, Canary Wharf, London E14 5HS. Please address any comments or enquiries on proposals contained in Chapter 7 to the FCA at by Friday 3 November 2017. Bank of England and Financial Conduct authority 2017 Contents Overview 5 1 Conditions governing business - minor amendments 8 2 Market risk - CRD IV amendments 9 3 Amendments to Transitional Measures Part to correct references 10 4 Application requirements - CRR and CRD amendments 11 5 Whistleblowing in UK branches of non-EEA deposit-takers 12 6 Joint PRA and FCA form, PRA Rulebook, and FCA Handbook changes 7 Markets in Financial Instruments Directive II (MiFID II), Insurance Distribution Directive (IDD), and Benchmarking Regulation (BMR)

4 Amendments 17 Consequential amendments to Short Form A 20 8 Application of EBA s Guidelines on corrections to modified duration for debt 9instruments 21 Naming convention for life insurers when reporting data by homogenous risk 10group 22 Appendices 24 Occasional Consultation Paper October 2017 5 Overview This Occasional Consultation Paper (OCP) sets out proposed changes to prudential Regulation authority (PRA) Rulebook Parts and supervisory statements (SS). Chapter 7 also contains joint PRA and Financial Conduct authority (FCA) proposals. This Consultation is relevant to all PRA-authorised firms. Chapter 7 is also relevant to FCA-regulated Markets in Financial Instruments Directive (MiFID) firms. The chapters contained in this OCP, the Rulebook Parts, SSs they propose to change, and the appendices where the draft policy is set out, are listed in the table below.

5 Chapter Rulebook Part/Supervisory statement Appendix 1. Overview Administration instrument - minor amendments to multiple Rulebook Parts 15 2. Conditions governing business minor amendment Conditions Governing Business 1 3. Market risk Capital Requirements Directive (CRD) IV amendment Internal Capital Adequacy Assessment (ICAA) 2 4. Transitional measures - references Transitional Measures 3 5. Application requirements Capital Requirements Regulation (CRR) and CRD amendments Amendments to multiple Rulebook Parts 4 6. Whistleblowing UK branches of non-EEA deposit-takers General Organisational Requirements 5 7. Joint PRA and FCA form, PRA Rulebook, and FCA Handbook changes - Markets in Financial Instruments Directive II (MiFID II), Insurance Distribution Directive (IDD), and Benchmarking Regulation (BMR) amendments Amendments to multiple Rulebook Parts and forms and the FCA Handbook 6 - 12 8.

6 Short Form A - consequential amendments Amendments to Short Form A 9 9. Application of EBA s Guidelines on corrections to modified duration for debt instruments SS13/13 Market risk 13 10. Naming convention for life insurers when reporting data by homogeneous risk group SS36/15 Solvency II: life insurance product reporting codes 14 The PRA s statutory obligations The PRA must comply with a number of statutory and public law obligations when making rules and determining the general policy and principles by which it performs its functions. Each chapter in this OCP will separately address the following obligations: 6 Occasional Consultation Paper October 2017 The Financial Services and Markets Act 2000 (FSMA)1 requires the PRA, so far as reasonably possible, to act in a way that advances its objectives: the general objectives to promote the safety and soundness of PRA-authorised persons, and for insurance, to contribute to ensuring that policyholders are appropriately protected; and the secondary objective to facilitate effective competition in the markets for services provided by PRA-authorised persons in carrying on regulated activities.

7 Provide an analysis of the costs together with an analysis of the benefits that will arise if the proposed rules are made or if, in the opinion of the PRA the costs or benefits cannot reasonably be estimated or it is not reasonably practicable to produce an estimate, include a statement of the PRA's opinion and an explanation of it. To have regard to the Regulatory Principles2 and certify that the policy proposals accord with these. Where the PRA proposes a rule which would apply both to mutual societies, and other authorised persons, prepare a statement setting out its opinion whether or not the impact of the proposed rule on mutual societies will be significantly The PRA should have regard to aspects of the economic policy of Her Majesty s government as recommended in HM Treasury s recommendations letter. The requirement of the Equality Act 2010 to have due regard to the need to eliminate discrimination and to promote equality of opportunity in carrying out its policies, services and functions.

8 The PRA has consulted the FCA on the proposals in this OCP. Administration instrument This OCP also consults on an administration instrument. An administration instrument is used to make minor corrections to PRA Rulebook provisions. The corrections are not substantive and are not intended to change PRA policy. The corrections will result in rule amendments. In making this instrument, the PRA aims to ensure that rules are correct, presented clearly and contain up-to-date references. Accurate Rulebook provisions allow the PRA to act in a way that advances the safety and soundness of PRA firms, and regarding insurers, contributes to policyholder protection. For these reasons, the PRA believes that administration instruments are compatible with the requirement on the PRA to act in a way that advances its objectives. The PRA consults with the FCA prior to undertaking consultations on administration instruments and ensures that proposed corrections are consistent with the regulatory principles.

9 Such minor corrections are unlikely to impact on competition or on mutual societies or give rise to any equality or diversity issues. Minor proposals are also unlikely to result in costs for firms, who will benefit from a more accurate Rulebook. Responses and next steps The Consultation closes on: Tuesday 17 October 2017 for the administration instrument (Appendix 15); 1 (2) FSMA 2 FSMA 3 (2) FSMA 7 Occasional Consultation Paper October 2017 Friday 3 November 2017 for Chapters 7 and 8; Tuesday 9 January 2018 for Chapters 2 6, 9 and 10. Please address any comments or enquiries to For Chapter 7 comments or enquiries can also be sent to the FCA at The policy contained in this Consultation Paper (CP) has been designed in the context of the current UK and EU regulatory framework.

10 The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including changes arising once any new arrangements with the European Union take effect. 8 Occasional Consultation Paper October 2017 Conditions governing business minor amendment This chapter sets out proposed amendments to the Conditions Governing Business Part of the PRA Rulebook to correct a typographical error. It is relevant to Solvency II firms that apply a volatility adjustment. The proposals do not represent a change in PRA policy. Proposal The PRA proposes to amend the Conditions Governing Business Part to correct rule (3)(b) by inserting the defined term volatility adjustment in exchange for the word volatility . The proposed changes are set out in Appendix 1.