Prudential Regulation Authority Rulebook

3.1

Periodic fees are set by the PRA and collected each year in order to recover the PRA’s Annual Funding Requirement (AFR). The AFR reflects:^[1]
• costs relating to Ongoing Regulatory Activities (ORA), being the costs which the PRA incurs in performing its functions as regulator; and
• any exceptional costs (eg to reflect recent changes in the scope of regulation) not incorporated into ORA costs.

3.2

An example of the latter were the costs of establishing the PRA in 2013, referred to in the rules as ‘transition costs’, which were recovered from PRA‐regulated firms in five equal tranches between 2013/14 and 2017/18. In each of those fee years, periodic fees payable by firms included a contribution towards transition costs.

3.3

The AFR is allocated across ‘fee blocks’,^[2] which are groupings of firms conducting broadly similar regulated activities. Firms pay a fee for each fee block into which they fall, the amount of fee being linked to the volume of activity undertaken by each firm within the fee block.

3.4

In addition to the AFR, firms which have a model permission under the Capital Requirements Regulation (CRR)^[3] or the Solvency II Directive^[4] pay a ‘model maintenance fee’. This fee covers the PRA’s costs associated with reviewing and maintaining firm models and is set according to the size of the firm and the models for which the firm has permissions.

3.5

As well as the AFR and the model maintenance fee, the PRA may introduce ’cost allocations’, subject to consultation. ‘Cost allocations’ are used to cover the costs of significant pieces of work that apply to a specific group of firms that fall into more than one of the existing fee blocks or a subset of firms within a fee block. Where the PRA proposes to introduce a new ‘cost allocation’ or change an existing ‘cost allocation’, it will consult. An example of a ‘cost allocation’ is the ring-fencing fee.^[5]

3.6

Together, the AFR, the model maintenance fee, and cost allocation fees are known as ‘periodic fees’ and are the main source of fee income for the PRA.

3.7

Rules relating to periodic fees can be found in Fees 3 and the Periodic Fees Schedule annexed to that Part. The Periodic Fees Schedule is updated each year to reflect the PRA’s budgeted AFR and the fee rates consultation.

3.8

In most cases the firm’s compliance with normal regulatory reporting will provide the necessary data for the periodic fees calculation. Where this is not the case, the PRA may invoke its own‐initiative information gathering powers under statute or the Rulebook to require other information to be provided, either direct to the PRA or to its collection agent.

3.9

The PRA may return a surplus to firms or require further payment to fund a deficit. The PRA reserves its right to retain a surplus or to fund a deficit temporarily from borrowing.