Prudential Regulation Authority Rulebook

6.1

The expectations set out in this SS for TWD firms are consistent with the expectations set out in SS5/21 ‘International banks: The PRA’s approach to branch and subsidiary supervision’.

6.2

For UK subsidiaries of third-country groups, the PRA applies the same regulatory requirements, and follows the same supervisory framework, as those firms that are based in the UK and are either not part of a group or are part of a group based in the UK. However, its supervisory approach takes into account the links between the subsidiary and the rest of the group of which it forms a part. Where that group is not based in the UK, the PRA will typically have less information on the risks arising in the group, and less ready access to those responsible for group risk management.

6.3

The PRA tailors its supervisory approach according to the nature, scale, and complexity of a firm’s UK operations, and potential impact on financial stability in the UK, and also according to the extent to which the firm’s UK operations are integrated with overseas operations. Accordingly, the PRA’s expectations of subsidiaries of third-country groups may differ in some areas from those of subsidiaries belonging to groups based in the UK.

6.4

Consistent with this approach, the PRA is likely to tailor its supervisory approach to TWD firms that are UK subsidiaries of third-country groups with regards to the expectations in this SS according to the nature, scale, and complexity of the trading activities in which those TWD firms are engaged in the UK. The PRA is likely to tailor its supervisory approach for these TWD firms with regards to their potential impact on financial stability in the UK. Accordingly, the PRA’s expectations of these TWD firms may differ in some areas from those of TWD firms that are UK headquartered firms on a case-by-case basis.

6.5

For example, in designing the TWD scenario the PRA expects TWD firms to make appropriately severe assumptions regarding a minimum baseline set of factors (set out in Chapter 3). For TWD firms that are subsidiaries of third-country groups, these TWD firms may align their assumptions with the assumptions used for developing an option to wind down trading activities under the oversight of the home-state regulator. For TWD firms which are part of Capital Requirements Regulation (CRR) consolidation entities, these assumptions are the responsibility of the TWD firm.

6.6

TWD firms should be able to co-ordinate the full or partial wind-down of trading activities across group entities and jurisdictions if their trading activities to be wound down span different group entities and jurisdictions.

6.7

TWD firms that are subsidiaries of third-country groups should leverage their group capabilities in order to meet these expectations. A TWD firm subject to US Title I requirements, for example, should leverage relevant existing capabilities in order to meet the expectations set out in this SS. However, if a TWD firm’s group does not have sufficient capabilities to meet these expectations, the PRA expects the TWD firm to develop local capabilities of its own.

6.8

TWD firms that are UK subsidiaries of third-country groups should include the TWD option at the legal entity level in their own recovery plans and provide local assurance of their TWD capabilities for executing the TWD option. This enables firms to comply with the requirements in the Recovery Plans Part of the PRA Rulebook and meet the PRA’s expectations as set out in SS9/17. These firms should also demonstrate that their TWD capabilities (whether leveraging group capabilities or using locally-built capabilities) can support the execution of the TWD option during post-resolution restructuring to demonstrate that they comply with Rule 8 in the Fundamental Rules Part of the PRA Rulebook.

6.9

The PRA will discuss its expectations with TWD firms through ongoing supervisory dialogue. If TWD firms are in any doubt about how these expectations apply to them, they should speak to their PRA supervisor. These expectations do not apply to third-country branches.