In Policy Statement (PS) 15/30, the FCA set out final rules for the new accountability framework for individuals working in the UK branches of overseas banks (incoming branches). Legislation has now come into force that allows the FCA to finalise the proposed rules published in consultation papers (CP15/10 and CP15/22 where applicable to incoming branches) and feedback statements (FS15/03) earlier this year. These include some changes that have been made to the ‘near final rules’ published by the PRA in August 2015.
The PS affects incoming branches of non-UK firms that have permission to accept deposits or deal in investments as principal (where that activity is PRA regulated) in the UK including the existing Approved Persons and non-UK based individuals that manage the affairs of an incoming branch.
Clarification of the territoriality for non-EEA branches
Changes in the PS mean that the Certification Regime (CR) and Conduct Rules have been limited to individuals that are ‘based in the UK’ (as opposed to ‘dealing with a UK client’ as previously proposed). This aligns the rules for non-EEA branches with the rules for EEA branches.
This change creates a disconnect with the proposed rules in CP15/22 which includes Material Risk Takers (MRT) performing the activities of a UK branch from overseas. This disconnect will be addressed in the PS for CP15/22 that will be published early in 2016.
This change does not affect those individuals that fall within the Senior Managers Regime (SMR).
This is considered to be a pragmatic and interim approach that will be reviewed after commencement of the regulation in March 2016.
Clarification of ‘relevant authorised person’ for EEA branches
An overseas firm that undertakes deposit taking under a services passport and but only undertakes other (non-deposit taking/dealing) activities from its UK branch would still be a ‘relevant authorised person’ as defined in the recent HM Treasury legislation. The FCA’s SMR and CR rules would apply but they would not be subject to the PRA’s SMR and CR rules for incoming branches.
The full Policy Statement can be found here.
More details about the Senior Managers and Certification Regime can be found in my previous posts.