Prudential Regulation Authority Rulebook

3.1

This chapter outlines specific areas where the PRA considers that its approach to assessing MA applications can be more flexible/streamlined. It covers what is meant by a streamlined approach and also explains how such an approach would work in practice.

3.2

The PRA is committed to assessing and providing decisions on all MA applications as quickly as possible, and expects to give its decision no later than six months from its receipt of a firm’s application (subject to the points made in paragraph 2.29 of this SoP). If a streamlined approach is considered suitable, then the PRA would expect to reach a decision more quickly.

3.3

When a firm engages with the PRA regarding a proposed MA application, the PRA will indicate whether such an application is likely to be suitable for a streamlined approach. However, an application will only be formally allocated to a streamlined review process once received by the PRA and after it has been assessed via the PRA’s triage process. The purpose of the triage process is to make an initial assessment of the scope and completeness of the application. It is also intended to facilitate a risk-based assessment of whether the application is suitable for a streamlined review, taking account of the extent, nature and complexity of the application, including the specific points covered in paragraphs 3.6 to 3.12 below.

3.4

Under a streamlined approach, the PRA would limit its review to a consideration of whether the proposed assets and/or liabilities are eligible for inclusion in the firm’s MA portfolio. The PRA may decide to review items not covered by the streamlined MA application review later, as part of its ongoing supervisory activity, as appropriate.

3.5

The PRA will still require firms to submit a written application as set out in Chapter 2 of this SoP, including accompanying documentary evidence and, for a change in scope application, changes signposted as described in paragraph 2.18 of this SoP.

3.6

The PRA will endeavour to undertake a streamlined review of an application where it is clearly in line with the MA eligibility conditions or proposes straightforward changes.

3.7

A firm may also propose safeguards to enable a streamlined review of its application in certain circumstances. For example, a firm may propose exposure limits that reduce the prudential risks associated with the proposed asset(s). Inclusion of safeguards within an application may enable the PRA to consider a wider range of applications as appropriate for a streamlined approach. Such safeguards will form part of the MA permission. Firms are encouraged to set out any proposed safeguards in the ARAP form and the PRA would be likely to discuss these with the firm during the ARAP.

3.8

Where a firm is only seeking to make changes to the asset types included in its MA portfolio, a streamlined approach is most likely to be suitable for:

• introducing an asset type that the firm already has permission to include in its MA portfolio, but where new features are present;
• introducing an asset that includes a new combination of features, but where the firm already has MA permission for other asset types containing subsets or different combinations of these features (covering between them all the features); or
• amending any safeguards that have formed part of an existing MA permission.

3.9

A streamlined approach may also be suitable for certain more novel assets, including assets that are more complex in nature or assets with HP cash flows. However, as a streamlined approach increases the risks to the PRA’s statutory objectives, including where risks to the quality of matching may be material, safeguards or mitigants to limit the materiality of these risks will be an important factor in determining whether an application is suitable for a streamlined approach. Nevertheless, even allowing for safeguards, the risks and complexities associated with some assets may mean that it is not possible to apply a streamlined approach for those assets.

3.10

Where a firm is seeking to make changes only to the types of liabilities included in its MA portfolio, a streamlined approach is most likely to be suitable for:

• introducing a type of liability that the firm already has permission to include in its MA portfolio but where new features are present; and
• introducing a liability that includes a new combination of features, but where the firm already has MA permission for other liability types containing subsets or different combinations of these features (covering between them all the features).

3.11

For other changes to MA portfolios, the ability for the PRA to apply a streamlined approach, and the review approach taken by the PRA, will depend on the extent, nature and complexity of the change(s) proposed. Due to the number of areas covered, initial MA permissions, and variations of permission that include many proposed changes to the scope of the MA permission, are less likely to be able to benefit from a streamlined approach. The same applies to applications that include a number of changes in one area (eg a number of proposed changes to the relevant portfolio of assets).

3.12

The PRA notes that its ability to undertake a streamlined review will critically depend on whether all relevant information is included in the application, the quality of the information provided by the firm and how straightforward it is for the firm to demonstrate compliance with the relevant requirements. If it proves necessary to request additional information or clarification from a firm then this is likely to increase the review time needed.