Prudential Regulation Authority Rulebook

30.

Conditional approvals may be granted in cases where a candidate has been deemed fit and proper overall but, typically, where the assessment has unveiled an action or development point whose completion would advance the PRA’s objectives.

31.

Before imposing conditions, the PRA may undertake an interview to assess the candidate’s competency and capability for the SMF they are seeking to perform. However, it may also impose conditions without a prior interview.

32.

The PRA may ask a candidate to undertake training to enhance their competency and capability in a specific area where this is desirable to advance the PRA’s objectives. Fulfilment of conditions may be subject to a deadline, which would differ from any potential accompanying statutory time limits on the individual’s approval.

33.

An example might be the case of a firm which is looking to appoint its current head of credit risk as Chief Risk Officer and is seeking approval for them to perform the Chief Risk function (SMF4). The candidate has substantial experience in credit and operational risk but their knowledge of market risk, or of insurance risk in the case of an insurer, which accounts for a significant part of the firm’s risk profile, is out of date. In this situation, it might be appropriate to attach a condition to the individual’s approval requiring them to undertake training to update their knowledge of market risk (or insurance risk in the case of an insurer) by a specified date.

34

In some circumstances conditions may require a candidate to refrain from or cease undertaking certain actions. They may also require the candidate to go beyond regulatory requirements in a given area. An example might be a systemically important bank which is seeking approval for a new Chair (SMF9) who sits on the board of two major non-financial firms. Notwithstanding that these two additional directorships may be within the limits imposed under relevant PRA rules (ie the rules in General Organisational Requirements implementing CRD IV), supervisors are concerned about their potential impact on the candidate’s ability to devote sufficient time to their proposed chairing role which, for a firm of this size and complexity, would typically require a near full-time commitment. In this situation, it might be appropriate to attach a condition to the individual’s approval requiring them to resign from one or both of the other non-executive directorships.

35.

There may be circumstances where conditions imposed on a Senior Manager’s approval can also be imposed on the firm as a whole using the PRA’s powers under section 55M of FSMA. An example could be a condition to produce a remediation plan within a specified timeframe setting out the process by which a specific business unit intends to rectify deficiencies in its prudential systems and controls. This could potentially be imposed on the firm, its Chief Executive (SMF1) or, if applicable, the relevant Head of Key Business Area (SMF6).

36.

In considering whether to impose a condition on a Senior Manager’s approval under section 63ZB of FSMA instead of or in addition to imposing a requirement on the firm under section 55M, the PRA may take into account a number of factors including but not limited to:

• whether it would be more appropriate to impose the requirement on the firm, for instance because it relates to a matter reserved to the board as a whole;
• the extent to which the subject matter of the condition already forms part of the Senior Manager’s responsibilities, as evidenced by documents including their Statement of Responsibilities; and
• whether the regulatory outcome which the condition is seeking is within the control of the relevant Senior Manager, including through any direct reports for which they are responsible.