PRA has published its first occasional paper consulting on minor changes to its rules. It proposes changes:  

  • to the method of submitting close links and controllers reports, so they must be submitted using the GABRIEL electronic system for reports with a reporting period ending on or after 31 December 2013 (FCA will be making similar changes);
  • to reporting on the Mortgage Lenders and Administrators Return (MLAR) so firms do not have to report in sterling. The changes bring the MLAR guidance into line with the GABRIEL process and will apply for reporting periods ending on or after 31 December 2013;
  • to remove references to designated investment exchanges (DIEs) from the PRA rules, following the proposal to remove the concept of a DIE from UK regulation;
  • to the Interim Prudential Sourcebooks for Insurers and Friendly Societies to allow more electronic reporting and mandate less paper reporting (although some paper reporting is still possible);
  • to clarify how FSCS protection applies to large unincorporated associations with protected deposits;
  • to implement the Basel Core Principle 11 on exposures to related parties. It plans to make rules, rather than guidance, that will cover its expectations on firms and introduce defined terms relevant to these expectations;
  • to make consequential amendments to its Handbook to reflect implementation of CRD4/CRR. The changes will also include rules on how firms should apply for a CRR Permission and financial reporting (FINREP) timings;
  • to import into the PRA Rulebook the CRD4 remuneration requirements. PRA does not intend to use its discretion to set a lower cap than the CRD4 standard of a 1:1 ratio between variable and fixed remuneration for performance years beginning 2014 and later. PRA does intend to use its discretion to apply a discount rate to apply to the maximum permitted 25% of variable remuneration, and awaits EBA's guidelines on the discount. The final change reflects the requirement that buyouts from contracts with other employers must align with the long-term interests of the new employer including on deferral, clawback and performance arrangements;
  • to set the lower initial capital for small credit institutions allowed by the CRR for banks that carry out one or more of the activities of providing basic banking services, lending to small and medium-sized enterprises and residential mortgage lending. PRA will consider each application from banks on individual merits, but will expect them to show they are resolvable under Bank Insolvency Procedure and to meet the threshold conditions. These banks may have a minimum capital of £1 million or €1 million; and
  • to implement PRA's plans to create its new rulebook following its published approach. It will divide most of its rules into (a) banking and (b) insurance, and then in turn into "Directive" firms (those covered by CRD4 and Solvency 2) and non-Directive firms. PRA plans a new naming and numbering structure, with short, purposive rules. It also plans to keep an online consolidated rulebook with links to relevant materials and time-travel functionality.

PRA asks for comments by 1 November. (Source: PRA Consults on Rule Changes)