Prudential Regulation Authority Rulebook

12.1

A ring-fenced body must enter into a transaction with a member of its group which is not a ring-fenced affiliate only on arm’s length terms.

12.2

A ring-fenced body must establish, implement and maintain an effective policy and procedures to identify and evaluate transactions entered into with other members of its group which are not ring-fenced affiliates to enable compliance with 12.1.

12.3

A ring-fenced body’s arm’s length policy must at least:

1. (1) establish robust means for identification, timely recording and monitoring of all transactions entered into with other group members which are not ring-fenced affiliates;
2. (2) specify how the terms of a transaction will be determined, including pricing and settlement;
3. (3) specify appropriate governance arrangements for amendments to the policy and procedures;
4. (4) specify processes for approval and reporting of exceptions to the policy and procedures; and
5. (5) include procedures for dispute resolution between the ring-fenced body and members of its group which are not ring-fenced affiliates with which it transacts.

12.4

1. (1) A ring-fenced body’s arm’s length procedures must include at least:
1. (a) approval of the arm’s length policy by its governing body;
2. (b) review by the governing body of the arm’s length policy at least annually taking into account the report of the internal audit function under (e) and the reports under (c);
3. (c) the provision of internal reports to its governing body on the operation of the arm’s length policy including the extent to which the ring-fenced body’s transactions comply with its arm’s length policy;
4. (d) assessment of the following matters by its internal audit function at least annually in relation to an appropriate subset of transactions:
1. (i) the extent to which the arm’s length policy complies with the requirements of this Chapter;
2. (ii) the effectiveness of the arm’s length policy; and
3. (iii) the effectiveness of the procedures established in compliance with this Chapter.
5. (e) provision of a report from the internal audit function to the governing body at least annually on its assessment of the matters in 12.4(1)(d).
2. (2) A ring-fenced body must ensure the scope of its internal audit function’s assessment of the matters in (1)(d) includes all subsets of transactions at least once every three years.