On 18 October 2018, the PRA published responses to its consultation paper (CP) 18/18 ‘Strengthening accountability: implementing the extension of the SM&CR to insurers’. The policy statement (PS) 26/18 also includes amendments to the final rules for implementing the regime to insurers and corrections to the Insurance General Application Part of the PRA Rulebook.
CP18/18 discussed the PRA’s proposals for technical changes to its rules relating to the regime extension. One of the proposals included technical changes relating to:
- application of an ‘overlap’ rule for individuals with ‘FCA responsibilities’;
- updates to the cross-references in the PRA Rulebook to the FCA’s Handbook;
- transitional arrangements for the widening of scope of the application of regulatory reference requirements;
- deletion of some previous transitional rules that are now obsolete; and
- other minor consequential amendments.
What is the ‘overlap’ rule?
The ‘overlap’ rule applies to banks and investment firms (i.e. deposit takers) and deals with the scenario where a PRA approved person with FCA responsibilities ceases to perform a PRA senior management function and does not have approval from the FCA to perform an FCA controlled function for their firm. The individual is allowed to perform the FCA controlled function until FCA approval has been obtained or for three months from the time it stopped performing the PRA senior management function. The rule, therefore, helps to minimise business interruption and allow for the continuity of FCA responsibilities at the firm.
Responses to the CP
Only one respondent commented on the proposals. The respondent acknowledged that the overlap rule was designed to reduce the administrative burden on insurers but felt that the “impact on firms is more onerous than if they were required to obtain two separate approvals from the FCA and PRA at the initial application stage.” While the PRA acknowledged the respondent’s comments, it said that its intention for the regime “has been to align the rules for all dual-regulated firms wherever possible.” Accordingly, the PRA will proceed to implement its proposals to the overlap rule as consulted.
The final rules as set out in the Appendix to the policy statement will take effect from Monday 10 December 2018.