Prudential Regulation Authority Rulebook

2.1

The Operational Continuity Part applies to firms that meet the conditions set out in Operational Continuity 1.1. The PRA will take into account the specific circumstances of firms when considering how they meet these requirements.

2.2

The PRA considers that the manner in which a UK incorporated firm should meet the requirements in the Operational Continuity Part may vary according to whether the Bank is the firm’s home or host resolution authority (‘home firm’ and ‘hosted firm’ respectively). This is because the PRA considers that this may affect how firms should prepare for resolution under PRA Fundamental Rule 8. The expectations in this SS apply to all firms in scope of the Operational Continuity Part unless otherwise stated.

2.3

Where it advances the PRA’s general objective to promote the safety and soundness of the firms it regulates, the PRA may use its power under section 55M of the Financial Services and Markets Act 2000 (FSMA) to require firms to comply with the Operational Continuity Part and the expectations in this SS. For example, if a firm has been authorised for less than 36 months but exceeds one of the three quantitative thresholds in Operational Continuity 1.1 with less than 36 months of data, the PRA will assess on a case-by-case basis whether the firm is in scope and therefore should comply with the Operational Continuity Part and this SS. The PRA will consult with affected firms before reaching a decision.

2.4

For third-country firms operating in the UK through a branch, the PRA intends to follow the same supervisory approach as that set out in SS1/18 ‘International banks: the Prudential Regulation Authority’s approach to branch authorisation and supervision’.^[6] The PRA will consider the operational continuity regime of the home authority when determining the risk appetite around the critical functions that the UK branch of the third-country firm intends to perform or is performing in the UK.

2.5

The PRA expects hosted firms to implement and maintain arrangements that meet the requirements in the Operational Continuity Part and the expectations in this SS. The PRA considers that for some expectations, as set out below, a hosted firm may be able to rely on those capabilities of its resolution group which achieve broadly comparable outcomes.^[7] The PRA considers this approach to be consistent with the Bank’s approach to assessing the resolvability of hosted firms, with reference to the capabilities of the resolution group. Those expectations are as follows:

• paragraphs 5.4 and 5.5 – information and arrangements that should be maintained to support the design and implementation of transitional service agreements (TSAs), with the exception of the reference to Chapter 9 on predictable and transparent charging structures;
• paragraphs 8.1 to 8.3 – objective service level agreements;
• paragraphs 11.2 to 11.13 – financial arrangements; and
• paragraphs 12.2 to 12.3 – management and governance arrangements.

2.6

Critical services is defined in the Operational Continuity Part and comprises those services that need to be available to one or more business units of a firm or entity of a group in order to provide functions critical to the economy or a firm’s core business lines.^[8]

2.7

The PRA’s expectations relating to the identification of services that support a firm’s core business lines vary between home and hosted firms:

• For home firms, the PRA expects a firm to ensure that its identification of core business lines includes those that are core to the firm, and additionally those that are core to the whole group of which it is a part.
• For hosted firms, the PRA expects that a firm’s identification of core business lines will identify those that the firm provides, or is involved in providing, and that are core to the whole group of which it is a part. Where a hosted firm has already identified business lines that are core to the firm, it may use these for the identification of relevant critical services.
• For home and hosted firms with a multiple point of entry (MPE) preferred resolution strategy, where possible the firm should instead identify business lines that are core to the resolution group of which it is a part.^[9]

2.8

For the purposes of this SS, the PRA describes the ways firms can organise the critical services they receive as:

• services provided by a business unit within the firm itself to one or more of its other business units (intra-entity);
• services received from another entity within the group of which they are a part (intra-group);^[10]
• services received from an entity that is not part of the same group (non-group provider);^[11] or
• a combination of the above.