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;
2. (b) passported activities carried on from a branch in another EEA State; and
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:

Article 273a(3) method

means the method for calculating the size of a firm’s on- and off-balance- sheet derivative business set out in Article 273(a)(3) of CRR amended by point (73) of CRR2.

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 arithmetic mean of the firm’s total assets over its last four accounting reference dates.

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 EEA parent financial holding company or EEA parent mixed financial holding company by which the PRA designated institution is controlled.

control functions

has the meaning provided in Article 3 of the Material Risk Takers Regulation.

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, and
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

has the meaning provided in Article 2 of the Material Risk Takers Regulation.

material business unit

has the meaning provided in Article 4 of the Material Risk Takers Regulation.

material risk taker

has the meaning given in 3.1.

Material Risk Takers Regulation

means the draft regulatory technical standards on criteria to define managerial responsibility and control functions, a material business unit and a significant impact on its risk profile, and categories of staff whose professional activities have a material impact on an institution’s risk profile published by the EBA on 18 June 2020.

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.

significant impact on the relevant business unit’s risk profile

has the meaning provided in Article 5 of the Material Risk Takers Regulation.

small CRR firm

means a CRR firm that satisfies both Condition 1 and Condition 2, where:

1. (1) Condition 1 is that the firm is not a large institution and either:
1. (a) has average total assets not exceeding €5 billion; or
2. (b) the firm has average total assets exceeding €5 billion but not exceeding €15 billion;
3. and where (in the case of Condition 1(b)):
1. (i) it is appropriate for the firm not to be required to comply with the rules specified in 5.3, taking into account the nature, scope, and complexity of its activities, its internal organisation and, if applicable, the characteristics of the group to which it belongs;
2. (ii) the firm has a small trading book;
3. (iii) the total value of the firm's derivative positions held with trading intent does not exceed 2% of its total on- and off-balance-sheet assets and the total value of its overall derivative positions does not exceed 5%, both calculated in accordance with the Article 273a(3) method; and
4. (iv) the firm is not subject to any obligations, or is subject to simplified obligations, in relation to recovery and resolution planning;
2. and
3. (2) Condition 2 is that the firm is not part of a group containing another firm which:
1. (a) is subject to this Part on an individual basis; and
2. (b) has average total assets exceeding €15 billion either on an individual basis, consolidated basis or sub-consolidated basis.

[Note: Art. 94(3) and (4) of the CRD]

small third country CRR firm

means a third country CRR firm that satisfies both Condition 1 and Condition 2, where

1. (1) Condition 1 is that the average total assets that relate to the activities of the branch operation of the third country CRR firm in the UK either:
1. (a) do not exceed €5 billion; or
2. (b) exceed €5 billion but do not exceed €15 billion;
3. and where (in the case of Condition 1(b)):
1. (i) it is appropriate for the third country CRR firm not to be required to comply with the rules specified in 5.3, taking into account the nature, scope, and complexity of the activities and internal organisation of its branch operation in the UK and, if applicable, the characteristics of the group to which it belongs:
2. (ii) the firm’s branch operation in the UK has a small trading book; and
3. (iii) the total value of the derivative positions held with trading intent relating to its branch operation in the UK does not exceed 2% of its total on- and off-balance-sheet assets and the total value of its overall derivative positions does not exceed 5%, both calculated in accordance with the Article 273a(3) method.
2. and
3. (2) Condition 2 is that the third country CRR firm is not part of a group containing another firm which:
1. (a) is subject to this Part on an individual basis; and
2. (b) has average total assets exceeding €15 billion either on an individual basis, consolidated basis or sub-consolidated basis.

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 or an EEA bank, 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.

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]