Following the introduction of the Financial Services and Markets Bill to parliament on 20 July 2022 (see our post), the PRA has published a discussion paper (DP4/22) on its approach to policy. Published just a day after the bill had its second reading in the House of Commons, the PRA expects this paper will help inform the debate in parliament as the bill is scrutinised.
The discussion paper was developed taking into consideration the text of the bill as originally introduced to parliament. As a result, it does not cover the ‘intervention power’ which the government announced it intends to table as an amendment to the bill.
The PRA covers in particular the following points:
- strong standards: these should continue to be pursued when regulating the financial services sector in order to provide financial stability and support the standing of the UK in the world as an international financial centre. Of particular importance in achieving the PRA’s objectives is the regulator’s operational independence;
- accountability: the PRA recognises the importance of accountability as the bill widens its responsibilities. It will continue to engage with HM Treasury (HMT), and will improve its engagement in certain areas in response to reforms introduced in the bill, e.g. HMT’s power to require regulators to review their rules. In respect of cost benefit analysis (CBA), the PRA will publish its methodology for CBA, as well as its approach to engaging with the new CBA panel consisting of external members, in line with the provisions of the bill;
- responsive approach: wider changes being implemented through the bill will enable the PRA to be more flexible in its response to risk, meaning that it can act swiftly, proportionately, and in a targeted manner. The broader rule-making powers and more responsive approach means that the PRA will require more data from stakeholders. The PRA will be reviewing regulatory reporting for both insurance and banking. In addition, the PRA intends to publish a framework for evaluation setting out how it will review its rules in the future; and
- accessible rulebook: the PRA recognises that the current regulatory framework is complex and difficult to navigate. As a result, it intends to streamline its rulebook. The final work depends on a number of factors. As an interim solution, the PRA will publish the Prudential and Resolution Policy Index. This will enable users to find relevant policies from a number of sources by topic area.
The deadline for comments is 8 December 2022. The responses will inform a consultation paper on the PRA’s approach to policy. The final publication will replace the PRA’s publications on its approach to banking and insurance supervision. The PRA’s approach to policy will take shape as the bill progresses through parliament.
...maintaining robust prudential standards, which are a cornerstone of UK financial stability and the international reputation of the UK as a safe and attractive place to do financial services business.