PRA announces deposit protection reduction: PRA has announced changes to the depositor compensation the FSCS provides. The changes result from the Deposit Guarantee Schemes Directive revisions (DGSD2) and mean that:
- the current £85,000 limit on deposit protection will decrease to £75,000, but existing depositors who would currently benefit from the higher limit will be able to do so until 31 December 2015;
- the new limit of £75,000 will apply now to some categories of depositor who fall under FSCS protection for the first time, such as large corporates;
- depositors with temporary high balances have protection for up to £1 million for six months from the date on which they receive money in their account or become entitled to it; and
- holders of all long-term insurance policies, professional indemnity insurance policies, and claims arising from death or incapacity will benefit from 100% cover.
PRA is consulting on rules to help manage the impact of the change on depositors who are contractually tied into products with balances above the new limit, and proposes to allow depositors to withdraw funds between the limits without charge until the end of the year if their protection will decrease as a result of the change. PRA also proposes changes to how firms provide the compensation information sheet. It asks for comments by 24 July.
PRA has also published:
- a statement of policy addressed to FSCS explaining what PRA expects of it;
- a policy statement on technical amendments relating to depositor and policyholder protection including its final rules to implement the changes it proposed, including those in relation to:
- depositor preference under the BRRD;
- who FSCS may treat as being absolutely entitled to an eligible deposit;
- how firms can exclude from their class A tariff basis calculations amounts which are not covered deposits; and
- how small local authorities can have access to their covered deposits;
- a policy statement on the protection limit for depositor and dormant account protection, including rule changes; and
- a supervisory statement on the changes.
PRA has previously noted that the FSCS (and therefore the changed limit) does not apply to passporting in EEA banks, which will be covered by their domestic scheme (up to the €100,000 limit) although UK incorporated subsidiaries of EEA banks will fall under FSCS and therefore be subject to the changes. (Source: PRA Announces Deposit Protection Changes)
PRA publishes remuneration guidance forms: PRA has published instructions to help firms complete their benchmarking and high earners' reports that form part of its supervisory activities on remuneration. (Source: PRA Publishes Remuneration Guidance Forms)
- a policy statement including final rules and feedback on several consultations;
- forms for firms to use under the new regimes;
- a supervisory statement setting out PRA’s expectations of firms in relation to the new regimes – specifically how they should comply with the regulatory framework of the SMR, CR, assessment of fitness and propriety and Conduct Rules; and
- a statement of policy on PRA’s use of the power to impose conditions and time limits on an approval to perform a Senior Management Function (SMF).
Nothing has fundamentally changed from the consultation version, except that PRA has postponed its decision on regulatory references pending a review of the Fair and Effective Markets Review (FEMR) recommendations. It has:
- adopted the Conduct Rules, unchanged;
- clarified how the transitional arrangements will apply, especially for individuals who are taking on new, or different, functions, and individuals within parent entities;
- clarified that firms should use current approved persons forms where they wish an individual to take up a position before 7 March 2016 (although the limitation period for PRA to determine applications will be suspended and, if it has not determined the application before 7 March, the firm will have to provide the additional information required under the SMR), but can use the new forms from 1 January 2016 for positions that will not take effect until 7 March or later;
- confirmed it expects firms to be able to make the required Statements of Responsibilities within the limit of 300 words per responsibility;
- confirmed it expects firms to report breaches of conduct rules promptly, but has slightly amended its rule to require notification within seven days of the firm discovering the breach or having reason to suspect there has been a breach. It says it cannot give further guidance on when firms might suspect a breach;
- introduced the proposed notification requirements for "standard" non-executive directors, and confirmed firms must impose a contractual requirement on these individuals, as well as others, to follow the Conduct Rules; and
- said it cannot commit to only applying the presumption of responsibility where there is a material or significant breach of a relevant requirement by imposing any threshold or de minimis damage amount but said it would take the seriousness of the matter into account.
PRA expects to publish several further documents over the next three months, in particular:
- policy statement and combination of final and near-final rules on the SMR and CR for incoming branches of non-EEA banks;
- policy statement and final rules to complete the Senior Insurance Managers Regime (SIMR) for Solvency 2 insurers;
- policy statement and final rules for the streamlined SIMR for smaller insurers; and
- consultation on any amendments to regulatory references following recommendations by the FEMR.
(Source: PRA Makes SMR Rules)