Prudential Regulation Authority Rulebook

1.1

This Part applies to a CRR firm that receives critical services supporting critical functions if it fulfils any of the following conditions on 1 January of any year:

1. (1) the average of the firm’s total assets it was required to report for the previous 36 months in accordance with Chapters 7 and 9 of the Regulatory Reporting Part of the PRA Rulebook exceeds £10bn;
2. (2) the average of the firm’s safe custody assets it was required to report for the previous 36 months in accordance with SUP 16.14 of the FCA Handbook as amended from time to time exceeds £10bn; or
3. (3) the average total amount of received sight deposits it was required to report for the previous 36 months in accordance with the ITS on supervisory reporting, or that it would have had to report if the ITS on supervisory reporting had been in force, exceeds £350m.

1.2

This Part ceases to apply to a CRR firm to which it applies under 1.1 if the firm does not meet any of the conditions in 1.1 on 1 January in each of two consecutive years.

1.3

1.2 does not prevent this Part applying to a CRR firm on a subsequent occasion if one of the conditions in 1.1 is met again.

1.4

A firm must calculate the averages in 1.1 by adding the values it was required to report each time a report was due and dividing the total by the number of times the report was due.

1.5

In this Part, the following definitions shall apply:

core business lines

means business lines and associated services which represent material sources of revenue, profit or franchise value for a firm or for its group.

critical services

means activities, functions or services performed for one or more business units of the firm or for the firm and another member of its group, whether by the firm itself, any other group member or a person outside the firm’s group, the failure of which would lead to the collapse of or present a serious impediment to the performance of the firm’s critical functions or core business lines.

CSD

has the meaning given in Article 2(1)(1) of CSDR.

CSDR

means Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012.

excluded agreement

means a contract or other agreement for the provision of critical services to a firm:

1. (1) which is governed by the laws of any part of the United Kingdom;
2. (2) the parties to which are incorporated in, or formed under the law of any part of, the United Kingdom; and
3. (3) the parties to which belong to the same resolution group.

excluded person

means a payment system, CSD, third-country CSD, SSS or central counterparty.

group provider

in relation to a firm, means:

1. (1) a member of its group that provides critical services to it; or
2. (2) the firm itself if one of its business units provides critical services to it.

ITS on supervisory reporting

Commission Implementing Regulation (EU) No 680/2014 as amended by Commission Implementing Regulation (EU) No 2016/313 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council.

payment system

has the meaning given in section 182 of the Banking Act 2009.

resolution group

has the meaning given in section 3(1) of the Banking Act 2009.

safe custody asset

has the meaning in the FCA Handbook as amended from time to time.

SSS

has the meaning given in Article 2(1)(10A) of CSDR.

third-country CSD

has the meaning given in Article 2(1)(2) of CSDR.

2.1

A firm must ensure the operational arrangements for the critical services it receives facilitate the effective execution of:

1. (1) its recovery plan; and
2. (2) the group recovery plan of its group.

2.2

A firm must ensure the operational arrangements for the critical services it receives facilitate the effective planning for and effective taking of actions in the event of:

1. (1) circumstances in which all or part of its business is likely to fail; or
2. (2) the failure of all or part of its business.

2.3

A firm’s operational and financial arrangements must ensure the continuity of the critical services it receives in the event of:

1. (1) circumstances in which all or part of the business of any member of its group is likely to fail; or
2. (2) the failure of all or part of the business of any member of its group.

3.1

A firm must:

1. (1) identify and document the details of the critical services it receives and details of the critical services required to deliver each of its critical functions and core business lines; and
2. (2) be able to demonstrate it can put in place transition arrangements for the continuity of the critical services in receives in the event of the firm being restructured or resolved.

3.2

Subject to 3.2A, if a firm receives critical services from another party, it must ensure the agreement governing the provision of these services:

1. (1) does not permit the other party to terminate, suspend or materially alter the services or facilities or the agreement as a result of the deterioration in the financial circumstances or the resolution of the firm or any of its group members; and
2. (2) entitles the firm to continue to receive those services during the firm’s resolution or restructuring as long as the firm fulfils its payment obligations under the agreement.

3.2A

3.2 does not apply in respect of an excluded agreement or an agreement entered into by a firm with an excluded person.

3.3

If a firm receives critical services from another party, it must ensure that the agreement governing the provision of those critical services is set on arm’s length terms.

3.3A

A firm must ensure that the charging structure for the critical services it receives is predictable and transparent.

3.4

A firm must ensure access by the firm, the service provider and the PRA to the operational assets supporting critical services is not disrupted in the event of a group member being restructured or resolved.

4.1

This chapter applies to a firm that receives critical services from a group provider.

4.2

A firm must ensure the group provider has a governance and management structure in place that supports the continuity of the provision of critical services to the firm.

4.3

A firm must ensure that in the event of the deterioration in the financial circumstances of another group member the group provider continues to provide critical services to the firm in accordance with the agreement governing the critical services provision or the documentation and transition required under 3.1.