Shearman & Sterling LLP | FinReg | UK Prudential Regulator Proposes Amendments to the Pre-Issuance Notification Rules for Regulatory Capital Instruments
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  • UK Prudential Regulator Proposes Amendments to the Pre-Issuance Notification Rules for Regulatory Capital Instruments
    09/09/2019
    The U.K. Prudential Regulation Authority has published a consultation paper in which it proposes amendments to the Pre-Issuance Notification (PIN) requirements for regulatory capital instruments. The PIN requirements are applicable to PRA-authorized Capital Requirements Regulation firms and require firms to notify the PRA of certain capital instruments that they intend to issue. The PRA assesses the terms and conditions of these instruments prior to issuance, to ensure that firms maintain quality capital resources which comply with CRR. Responses to the consultation are requested by December 9, 2019.

    PIN requirements are provided for in the EU CRR. However, the PRA has had additional rules that allow a firm to classify subsequent issuances of an approved Common Equity Tier 1 instrument as CET1, subject to meeting certain conditions and providing notification to the PRA. The revisions to CRR (known as CRR II), published on June 7, 2019, include revisions to the CRR PIN requirements that will permit the same subsequent classification by firms. Subject to certain exceptions, CRR II will apply directly across the EU from June 28, 2021. The CRR II amendments to the PIN requirements have applied since June 27, 2019. The PRA issued a modification by consent on June 10, 2019, to provide a temporary solution to the overlap of rules. The PRA is therefore proposing to update its rules to address permanently this overlap.

    In addition, the PRA is proposing other changes to the PIN rules, including reinforcing the governance of CET1 issuance, to allow firms to classify subsequent issuances of Additional Tier 1 instruments, subject to meeting certain conditions and notifying the PRA, and to remove the requirement for firms to make a pre-issuance notification of Tier 2 instruments. The PRA is also proposing to revise its Supervisory Statement, "CRD IV and Capital", to clarify its expectations of firms to maintain the quality of their capital resources. The Statement will be re-named as "Definition of Capital".

    View the consultation paper.

    View details of CRR II.

    View the existing Supervisory Statement, CRD IV and Capital.

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