Out-Law / Your Daily Need-To-Know

Mandatory twice-yearly 'branch returns' will be required of foreign banks from July, says PRA

01 May 2015, 4:33 pm

Authorised banks, building societies and investment firms that are not UK-headquartered will be required to submit twice-yearly returns to the Prudential Regulation Authority (PRA) from 1 July, the regulator has announced.

The PRA has been trialling the 'branch return' as a means of gathering information about the UK operations of foreign PRA-supervised firms since the initiative was first proposed in February 2014. It has now published its final policy statement on the format of the proposed return, including finalised rules.

The regulator said that it had received completed branch returns from 131 firms during the pilot exercise, which involved all 152 firms that would fall under the new regime. This was "a high rate of response for a voluntary exercise", it said.

"The branch return has already shown itself to be of value in this pilot," the PRA said. "It has supported the implementation of the PRA's risk appetite for branches, informed supervisory strategy for individual firms, allowed a cross-firm view with regard to certain specific risks and provided insights to support policy formulation."

The final version of the branch return has "not materially changed" from that set out in the PRA's original consultation on its proposals, it said.

"The responses provided to date from the relevant banks would appear to validate the PRA's approach," said UK banking reform expert Tony Anderson of Pinsent Masons, the law firm behind Out-Law.com.

The branch return requirement forms part of the PRA's regulatory regime for international bank branches, a regulatory term which refers to a UK unit of a foreign bank which is not a separate legal entity in the same way as a subsidiary. Although branches are ultimately subject to the capital requirements and supervisory regime of the parent bank's home country, the PRA requires banks wishing to open UK branches to have a resolution plan in place that "reduces the impact on financial stability in the UK" in the event of that bank's failure.

Both financial regulators and the UK Treasury have also announced their intention to extend new rules governing the conduct of senior bankers to UK branches of foreign banks when these are introduced in March 2016.