Prudential Regulation Authority Rulebook

17.

There may be circumstances where a firm wants to appoint a candidate to perform an SMF who may, in their proposed role, be responsible for dealing with unusual or severe challenges in the foreseeable future. In this situation, although the candidate is deemed fit and proper, it might be appropriate to approve them subject to a time limit, with a view to reassessing them for a permanent position in due course.

18.

In this situation, a time-limited approval may be accompanied by a condition requiring the individual to:

• complete a certain action on or before the end of the time limit, for example a requirement on an acting Head of Internal Audit (SMF5) to produce a revised Audit Plan for the firm within the next six months; or
• refrain from taking specific actions or decisions associated with the role until a permanent approval is granted, for example a requirement on an interim Chief Risk function (SMF4) not to review the firm’s risk appetite until approved on a permanent basis.

19.

A further example could be where:

• the Chief Executive (SMF1) of a large bank resigns unexpectedly;
• the firm wants to appoint the head of retail banking, which is the bank’s largest and most significant business line, as interim Chief Executive;
• PRA supervisors consider that the head of retail banking would be capable of running the firm on a day-to-day basis but note that they have no experience developing a long-term strategy for the firm as a whole; and
• the firm’s Chair and Head of HR estimate that it could take up to a year to recruit a permanent Chief Executive and believe that the Head of Retail Banking could be the ideal candidate if they can deliver a viable five-year strategic plan.

19A.

Another example could be where:

• the Chief Executive (SMF1) of a large insurer resigns unexpectedly;
• the firm wants to appoint as an interim Chief Executive, an individual with extensive professional experience, but little or no experience in the wider responsibilities of a Chief Executive. Such an individual could currently be for example a Chief Underwriting Officer at an insurer;
• PRA supervisors consider that the individual proposed as Chief Executive would be capable of running the firm on a day-to-day basis but note that they have no experience in developing and implementing a long-term strategy for the firm as a whole; and
• the firm’s Chair of the Board and Head of HR estimate that it could take up to a year to recruit a permanent Chief Executive and believe that the individual currently proposed to be Chief Executive could be the ideal candidate if they can deliver a viable five-year strategic plan.

20.

In these situations, it may be appropriate to approve the individual as Chief Executive (SMF1) subject to a twelve-month time limit, during which they would be expected to produce a five-year plan for the firm. The plan would be taken into account when considering whether to approve them on a permanent basis.

21.

The PRA may vary or remove a time limit on a Senior Manager’s approval before the time limit lapses depending on its assessment of the individual circumstances of the case, including but not limited to fulfilment of any conditions.