Consolidated Supervision and Financial Holding Companies: Further PRA consultation

Following on from the publication of PRA consultations and policy statements on the implementation of EU and Basel requirements relating to holding companies (including those within PRA CP17/20, PS26/20, PS29/20 and PRA CP5/21), the PRA has published a further consultation (CP12/21) which sets out:

  • proposed changes to PRA rules in respect of the application of existing consolidated prudential requirements to financial holding companies (FHCs) and mixed financial holding companies (MFHCs) that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA), reflecting the transition to placing direct responsibility on holding companies for compliance with consolidated requirements; and
  • proposed guidance with respect to directions and penalties over holding companies under Part 12B FSMA.

The PRA considers that the consequential amendments to the PRA Rulebook do not amount to substantive changes in PRA-regulated groups’ prudential requirements. However, the holding company approval regime will affect the balance of responsibilities within PRA regulated groups and the related PRA supervisory practices, including with respect to enforcement. CP12/21 provides a timely reminder to firms within affected groups of the new PRA consolidated prudential framework, as well as a reminder to relevant holding companies to apply for approval or exemption from the PRA by 28 June 2021. The PRA expects to receive applications for approval or exemption from approval from around 60 holding companies.

The Financial Services Act 2021 also sets out comparable new requirements for approval of, and imposition of penalties upon, holding companies of FCA-regulated groups that are subject to consolidated supervision under the forthcoming Investment Firms Prudential Regime, which will apply from 1 January 2022.  The imposition of responsibilities at holding company level will be a more fundamental change for FCA regulated groups and their holding companies than for PRA-regulated groups.  The FCA has yet  to publish detailed requirements in this area but is expected to do so during H2 2021.


Scope CP12/21 is relevant to FHCs, MFHCs, and banks and PRA-designated investment firms that are part of a UK consolidation group controlled by a UK parent FHC or UK parent MFHC.
Background The current approach to the application of consolidated prudential requirements will be changing.

  • At present, PRA Rulebook requirements apply to PRA-authorised firms on an individual and consolidated basis. Where a PRA-authorised firm is controlled by a UK parent financial holding company or UK parent mixed financial holding company (for which the PRA is responsible for supervision on a consolidated basis), the PRA-authorised firm is required to comply with the rules on the basis of the consolidated situation of its UK parent holding company.
  • Under the new approach, PRA-authorised firms will comply with PRA rules on an individual basis and the approved or designated holding company (or the authorised firm parent, where applicable) will comply with the rules on a consolidated basis. The Capital Requirements Regulation II (CRR II), as onshored into UK law, requires a UK consolidation group’s approved parent holding company or the designated holding company (designated by the PRA where the parent holding company cannot be approved or cannot meet the exemption criteria) to become directly responsible for ensuring that consolidated prudential requirements are met.
  • CP12/21 sets out consequential amendments to the PRA Rulebook to ensure that it remains operable once the responsibility for compliance with consolidated requirements moves from the PRA authorised firm to the approved/designated holding company. The changes do not introduce new prudential requirements.
  • The PRA proposes to introduce a new Statement of Policy (SoP) with respect to supervisory measures and penalties in respect of holding companies under Part 12B FSMA, covering the taking of measures, including directions; the imposition of penalties; and the amount of penalties. The PRA is also proposing to amend the SoP ‘The Prudential Regulation Authority’s approach to enforcement: statutory statements of policy and procedure’ to reflect the fact that it will apply to holding companies.


 Timing and next steps
28 June 2021 Relevant holding companies must apply for approval or exemption from the PRA by this date
22 July 2021 CP12/21 – Consultation closes
15 September 2021 Proposed changes (except the notification requirement in the Groups Part – see below) in CP12/21 expected to apply
1 January 2022 Requirement relating to the notification of the exclusion of a subsidiary from the consolidation group in the Groups Part expected to apply



Clive Cunningham
Clive Cunningham
+44 20 7466 2278
Katherine Dillon
Katherine Dillon
Of Counsel
+44 20 7466 2522
Mark Staley
Mark Staley
Senior Associate
+44 20 7466 7621
Patricia Horton
Patricia Horton
Professional Support Lawyer
+44 20 7466 2789

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