Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to every firm that is:

1. (1) a CRR firm;
2. (2) a credit union; or
3. (3) a third country CRR firm in relation to the activities of its establishment in the UK.

1.2

In this Part, the following definitions shall apply:

certification regime

means the requirements of the regulatory system which apply to relevant authorised persons insofar as they relate to persons performing certification functions including those set out in Certification and Fitness and Propriety and the corresponding FCA requirements in SYSC 5.2 and FIT of the FCA Handbook.

Chairman function

has the meaning given in Senior Management Functions 4.2.

Chief Risk function

has the meaning given in Senior Management Functions 3.4.

compliance oversight function

means an FCA controlled function specified in SUP 10C.6.1R of the FCA Handbook.

Credit Union Senior Manager function

has the meaning given in Senior Management Functions 6.2.

FCA approved person

means a person approved to perform an FCA controlled function by the FCA under section 59 of FSMA.

FCA Chairman of nomination committee function

means an FCA controlled function specified in SUP 10C.5.2R of the FCA Handbook.

FCA designated senior management function

means an FCA controlled function specified in SUP 10C.4.3R of the FCA Handbook.

FCA other local responsibility senior management function

means the controlled function specified in SUP 10C.8.1R of the FCA Handbook.

FCA other overall responsibility senior management function

means the FCA controlled function specified in SUP10C.7.1R of the FCA Handbook.

FCA responsibilities

means any of:

1. (1) the functions set out in SYSC 4.7.7R (Table of senior management responsibilities) of the FCA Handbook;
2. (2) the responsibilities allocated under SYSC 4.7.8R of the FCA Handbook;
3. (3) the functions set out in SYSC 4.8.9R (Table: the FCA prescribed senior management responsibilities for third country relevant authorised persons) of the FCA Handbook); and
4. (4) the responsibilities allocated under SYSC 4.8.10R of the FCA Handbook.

Group Entity Senior Manager function

has the meaning given in Senior Management Functions 5.2.

management responsibilities map

has the meaning given in 6.

oversight PRA senior management function

means a PRA senior management function set out in Senior Management Functions 4.

prescribed responsibility

means one of the responsibilities in 4.1 and 4.2.

proprietary trading

means

1. (a) the regulated activity of dealing in investments as principal as 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.); and
2. (b) ancillary activities and (in relation to MiFID business) ancillary services carried out in relation to the regulated activity.

recovery plan

has the meaning given in Recovery Plans 1.2.

resolution pack

has the meaning given in Resolution Pack 1.2.

ring-fencing obligation

means any obligation, prohibition or other requirement imposed on a ring-fenced body by or under FSMA, by virtue of it being a ring-fenced body, including any statutory instrument made under FSMA and any ring-fencing rule, but not including any rule made by the FCA.

ring-fenced body prescribed responsibility

means the responsibility in 4.2(4).

senior management regime

means the requirements of the regulatory system which apply to relevant authorised persons insofar as they relate to approved persons performing PRA senior management functions and FCA designated senior management functions, including those set out in Senior Management Functions, and Allocation of Responsibilities and Fitness and Propriety.

small CRR firm

means a CRR firm which has gross total assets of £250 million or less, determined on the basis of the annual average amount calculated across a rolling period of five years (calculated by reference to the firm’s annual accounting date). Where the firm has been in existence for less than five years, the calculation will be made on the basis of the annual average amount for the period during which the firm has been in existence (calculated by reference to the firm’s annual accounting date).

small firm prescribed responsibility

has the meaning given in 5.2.

statement of responsibilities

means a statement of the affairs of a relevant authorised person or a third country CRR firm for which it is intended that a person who performs (or is subject to an application to perform) a PRA senior management function is (or will be) responsible.

UK branch prescribed responsibility

means one of the responsibilities in 6.2.

1.3

This Part does not apply to a function performed by:

1. (1) a person acting as an insolvency practitioner within the meaning of section 388 of the Insolvency Act 1986; or
2. (2) a person acting as a nominee in relation to a voluntary arrangement under Parts I (Company Voluntary Arrangements) and VIII (Individual Voluntary Arrangements) of the Insolvency Act 1986; or
3. (3) a person acting as an insolvency practitioner within the meaning of Article 3 of the Insolvency (Northern Ireland) Order 1989; or
4. (4) a person acting as a nominee in relation to a voluntary arrangement under Parts II (Company Voluntary Arrangements) and VIII (Individual Voluntary arrangements) of the Insolvency (Northern Ireland) Order 1989.

2.1

A firm must ensure that any application it makes for the approval of a person to perform a PRA senior management function is accompanied by a statement of responsibilities.

2.2

A firm must ensure that the statement of responsibilities accompanying an application for approval to perform a PRA senior management function in relation to it includes any prescribed responsibilities, small firm prescribed responsibilities, UK branch prescribed responsibilities, FCA responsibilities and other responsibilities allocated to, and which are to form part of the responsibilities of, that person.

2.3

A firm must ensure that any responsibilities allocated to, and that form part of the responsibilities of, a person who performs a PRA senior management function in relation to it are consistent with the scope of that PRA senior management function and of any prescribed responsibilities, small firm prescribed responsibilities, UK branch prescribed responsibilities, FCA responsibilities and other responsibilities allocated to that person.

2.4

1. (1) A firm must have, at all times, a complete set of current and up to date statements of responsibilities for all persons approved to perform a PRA senior management function on its behalf.
2. (2) A firm must prepare a statement of responsibilities for each PRA approved person as a single document covering every PRA senior management function and FCA designated senior management function for which
1. (a) the PRA approved person has approval from the PRA or the FCA, as the case may be, to perform; or
2. (b) an application for approval is being made.

3.1

1. (1) A firm (other than a small CRR firm, a credit union or a third country CRR firm) must allocate each of the prescribed responsibilities set out in 4.1 (other than 4.1(13) to (19)) to one or more persons who perform:
1. (a) a PRA senior management function; or
2. (b) subject to 3.6(1), an FCA designated senior management function
3. on behalf of the firm.
2. (2) If the circumstances set out in a prescribed responsibility in 4.2 (1), (2), or (3) apply to a firm (other than a small CRR firm, a credit union or a third country CRR firm), the firm must allocate the prescribed responsibility to one or more persons who perform:
1. (a) a PRA senior management function; or
2. (b) subject to 3.6(1), an FCA designated senior management functions
3. on behalf of the firm.

3.2

1. (1) A firm (other than a small CRR firm, a credit union or a third country CRR firm) must allocate each of the prescribed responsibilities in 4.1(13) to (19) to one or more persons who perform:
1. (a) an oversight PRA senior management function; or
2. (c) the FCA Chairman of nomination committee function
2. on behalf of the firm.

3.3

1. (1) A small CRR firm must allocate each of the small firm prescribed responsibilities to one or more persons who perform:
1. (a) a PRA senior management function; or
2. (b) subject to 3.6(2), an FCA designated senior management function
3. on behalf of the small CRR firm.
2. (2) A credit union must allocate each of the small firm prescribed responsibilities to one or more persons who perform:
1. (a) the Credit Union Senior Manager function; or
2. (b) subject to 3.6(2), an FCA designated senior management function
3. on behalf of the credit union.

3.4

A firm which is a ring-fenced body must ensure that the ring-fenced body prescribed responsibility is allocated to each person who:

1. (1) performs a PRA senior management function or, subject to 3.6(1), an FCA designated senior management function; and
2. (2) is responsible for managing any area of the ring-fenced body’s business that is subject to a ring-fencing obligation

on behalf of the firm.

3.5

A third country CRR firm must allocate each of the third country CRR firm prescribed responsibilities to one or more persons who perform:

1. (1) a PRA senior management function; or
2. (2) subject to 3.6(3), an FCA designated senior management function

on behalf of the third country CRR firm.

3.6

1. (1) A firm must not allocate a prescribed responsibility to a person who performs an FCA other overall responsibility senior management function.
2. (2) A small CRR firm or a credit union must not allocate a small firm prescribed responsibility to a person who performs an FCA other overall responsibility senior management function.
3. (3) A third country CRR firm must not allocate a prescribed responsibility to a person who performs an FCA other local responsibility senior management function.

4.1

Each of the responsibilities set out in this rule is a prescribed responsibility:

1. (1) responsibility for the firm’s performance of its obligations under the senior management regime;
2. (2) responsibility for the firm’s performance of its obligations under the certification regime;
3. (3) responsibility for compliance with the firm’s obligations in relation to its management responsibilities map;
4. (4) responsibility for the firm’s performance of its obligations under Fitness and Propriety in respect of its notified non-executive directors;
5. (5) responsibility for monitoring effective implementation of policies and procedures for the induction, training and professional development of senior management, other than members of the governing body;
6. (6) responsibility for overseeing the adoption of the firm’s culture in the day-to-day management of the firm;
7. (7) responsibility for managing the allocation and maintenance of the firm’s capital, funding and liquidity;
8. (8) responsibility for the firm’s treasury management functions;
9. (9) responsibility for the production and integrity of the firm’s financial information and its regulatory reporting under the regulatory system;
10. (10) responsibility for developing and maintaining the firm’s recovery plan and resolution pack and for overseeing the internal processes regarding their governance;
11. (11) responsibility for managing the firm’s internal stress-tests and ensuring the accuracy and timeliness of information provided to the PRA and other regulatory bodies for the purposes of stress- testing;
12. (12) responsibility for the development and maintenance of the firm’s business model by the governing body;
13. (13) responsibility for leading the development and monitoring effective implementation of policies and procedures for the induction, training and professional development of all members of the firm’s governing body;
14. (14) responsibility for leading the development of the firm’s culture by the governing body as a whole;
15. (15) responsibility for safeguarding the independence of, and overseeing the performance of, the internal audit function, including the performance of a person approved to perform the Head of Internal Audit function on behalf of the firm, in accordance with Compliance and Internal Audit 3;
16. (16) responsibility for safeguarding the independence of, and overseeing the performance of, the compliance function, including the performance of a person approved by the FCA to perform the compliance oversight function on behalf of the firm, in accordance with Compliance and Internal Audit 2;
17. (17) responsibility for safeguarding the independence of, and overseeing of the performance of, the risk function , including the performance of a person approved to perform the Chief Risk function on behalf of the firm, in accordance with Risk Control 3.4 and 3.5;
18. (18) responsibility for overseeing the development of, and implementation of the firm’s remuneration policies and practices in accordance with Remuneration;
19. (19) responsibility for the independence, autonomy and effectiveness of the firm’s policies and procedures on whistleblowing, including the procedures for protection of staff who raise concerns from detrimental treatment;
20. (20) responsibility for the allocation of all prescribed responsibilities in accordance with 3.1;
21. (21) responsibility for the firm’s performance of its obligations under Outsourcing.

4.2

Each of the responsibilities set out in this rule is a prescribed responsibility in the circumstances specified:

1. (1) if the firm carries out proprietary trading, responsibility for the firm’s proprietary trading activities;
2. (2) if the firm does not have a person who performs the Chief Risk function, responsibility for the compliance of the firm’s risk management systems, policies and procedures with the requirements of Risk Control 2.1 to 2.4;
3. (3) if the firm outsources its internal audit function, responsibility for taking reasonable steps to ensure that every person involved in the performance of that function is independent from the persons who perform external audit, including:
1. (a) supervision and management of the work of outsourced internal auditors; and
2. (b) management of potential conflicts of interest between the provision of external audit and internal audit services;
4. (4) if the firm is a ring-fenced body, responsibility for ensuring that those aspects of the firm’s affairs for which a person is responsible for managing are in compliance with the ring-fencing obligations.

5.1

This Chapter applies only to

1. (1) a small CRR firm; and
2. (2) a credit union.

5.2

Each of the responsibilities listed in this rule is a small firm prescribed responsibility:

1. (1) each of the prescribed responsibilities in 4.1(1) – (3);
2. (2) responsibility for allocation of all small firm prescribed responsibilities in accordance with 3.3(1) or (2), as the case may be;
3. (3) responsibility for implementing and managing the firm’s risk management policies and procedures;
4. (4) responsibility for managing the systems and controls of the firm;
5. (5) responsibility for managing the firm’s financial resources;
6. (6) responsibility for ensuring the governing body is informed of its legal and regulatory obligations.

6.1

This chapter applies only to a third country CRR firm in relation to the activities of its establishment in the UK.

6.2

Each of the responsibilities set out in this rule is a UK branch prescribed responsibility:

1. (1) responsibility for the firm’s performance of its obligations under the senior management regime, including implementation and oversight;
2. (2) responsibility for the firm’s performance of its obligations under the certification regime;
3. (3) responsibility for compliance with the firm’s obligations in relation to its management responsibilities map;
4. (4) responsibility for management of the firm’s risk management processes in the UK;
5. (5) responsibility for the firm’s compliance with the UK regulatory system applicable to the firm;
6. (6) responsibility for the escalation of correspondence from the PRA, FCA and other regulators in respect of the firm to the governing body and or the management body of the firm, or, where appropriate, of the parent undertaking or holding company of the firm’s group;
7. (7) responsibility for management of the firm’s systems and controls in the UK;
8. (8) responsibility for the allocation of all UK branch prescribed responsibilities in accordance with 3.5;
9. (9) responsibility for management of the firm’s liquidity or, where a liquidity waiver is in place, the submission of information to the PRA on the firm’s liquidity position;
10. (10) responsibility for the production and integrity of the firm’s financial information and its regulatory reporting in respect of its regulated activities;
11. (11) responsibility for the firm’s performance of its obligations under Internal Governance of Third Country Branches 7.

7.1

A firm must at all times have a comprehensive and up-to-date single document (a management responsibilities map) that describes the firm’s management and governance arrangements including:

1. (1) details of the reporting lines and the lines of responsibility; and
2. (2) reasonable details about the persons who are part of these arrangements;
3. (3) the responsibilities of those persons.

7.2

A management responsibilities map must in particular include:

1. (1) the names of all the firm’s approved persons (including FCA approved persons), notified non-executive directors, credit union non-executive directors and senior management and the responsibilities held by each, including all FCA responsibilities;
2. (2) if any PRA senior management functions or FCA designated senior management functions are performed by more than one person, or any prescribed responsibilities, small firm prescribed responsibilities or UK branch prescribed responsibilities, as the case may be, are allocated to more than one person, details of how the performance or discharge of the responsibilities is to be carried out by those persons;
3. (3) matters reserved to the management body (including the terms of reference of its committees) including, in the case of a third country CRR firm, the equivalent body (or its committees) responsible for the management of the third country CRR firm’s business and activities in the UK;
4. (4) where the firm is a member of a group;
1. (a) how the firm’s management and governance arrangements fit together with those of its group and the extent to which the firm’s management and governance arrangements are provided by or shared with other members of its group; and
2. (b) details of the reporting lines and the lines of responsibility (if any) to persons who are employees or officers of other group members or to committees or other bodies of the group or of other group members; and
5. (5) details of how the matters set out in (1) to (4) fit into the firm’s management and governance arrangements as a whole.

7.3

If the content of a statement of responsibilities is modified or revised, a firm must send a copy of that revised statement of responsibilities to the PRA as soon as possible.

7.4

A firm must retain a copy of each version of:

1. (1) its management responsibilities map; and
2. (2) the statement of responsibilities for each person who performs or has performed a PRA senior management function for the firm

for a period of ten years from the date on which the management responsibilities map or the statement of responsibilities, as the case may be, is superseded by a more up-to-date version.

8.1

A firm (other than a third country CRR firm) must ensure that the office of the Chairman function has resources that are adequate as to both quality and quantity to enable it to fulfil its role within the firm.