Finance Alerter: PRA Consultation On Supervising International Banks In The UK

UK's Prudential Regulation Authority (PRA) consults on its approach to international bank branch supervision. The PRA is currently consulting on its proposed approach to supervising UK branches of international banks. It recently published a consultation paper Supervising international banks: the PRA's approach to branch supervision (CP4/14) (the "Paper"). The consultation is open until 27 May 2014.

International banks in the UK

International banks can either operate in the UK as subsidiaries (i.e. through a separately incorporated subsidiary company) or branches (i.e. an office that is legally a part of the legal entity in the home county jurisdiction) and this consultation relates to the latter. It can be more efficient to operate as a branch - a branch does not require its own capital base in the UK or a separate board and there are therefore savings in costs of capital, governance costs, administration and reporting. As a result, operating through a branch has been a popular means of coming to the UK - the PRA notes that there are currently 145 branches of international banks operating in the UK; accounting for some 31% (£2.4 trillion) of the total assets of the UK banking system. However, for regulators branches can be more problematic as they are more difficult to supervise and the UK regulators have, to a lesser or greater degree, to rely on supervision and regulation in the home state.

The paper discusses the PRA's new approach to regulating such branches, in particular in the light of its concern to safeguard what it defines as critical economic functions ("CEFs" which are broadly retail banking; corporate banking; payments, clearing and settlement; custody; intra-financial system borrowing and lending; and / or investment banking). The new proposals discussed in the Paper are an attempt to strike a balance between welcoming in foreign capital and investment on the one hand, but protecting the UK financial system and the Financial Services Compensation Scheme from imported banking crises on the other.

The PRA's proposals

The proposals in the Paper cover branches of both institutions from within the European Economic Area and branches of financial institutions from outside the European Economic Area (non-EEA branches). It is proposed that all such branches complete a new data collection return. However, the proposals in the Paper are likely to have the biggest impact on the 82 non-EEA branches offering retail and wholesale banking...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT