Prudential Regulation Authority Annual Report 2019

1 March 2018 - 28 February 2019

Presented to Parliament pursuant to paragraph 19(4) of Schedule 1ZB of the Financial Markets and Services Act 2000 (FSMA) as amended by the Financial Services Act 2012 and the Bank of England and Financial Services Act 2016.

The report contains:

• Foreword by the Chair 
• Report by the Chief Executive  
• Prudential Regulation Committee (PRC) – members and responsibilities 
• Annual report of the PRC to the Chancellor of the Exchequer 
• Review of 2018-19  
• Complying with FSMA  
• PRA Annual Competition Report – June 2019 and
• Financial Review of 2018-19  

From 1 January 2019, the PRA’s general safety and soundness objective has been amended to reflect the aims of structural reform (also referred to as ring-fencing). The PRA’s first report on certain aspects of ring-fencing is included in the ‘Complying with FSMA’ section.

The PRA Annual Report completes our reporting obligations for the year ending 28 February 2019, following the publication of the PRA Business Plan 2019/20, including the PRA Strategy. 

Readers may find it helpful to read the PRA Annual Report alongside the Bank of England Annual Report and Accounts, which includes the PRA’s statement of accounts for the reporting period ended 28 February 2019.

Prudential Regulation Authority Annual Report 2019

Consultation

The consultation closed on Friday 13 September 2019. No correspondence was received.

Examples of how the PRA delivered its 2018/19 strategic goals

• Delivered the implementation of the ring-fencing of core retail services from wholesale and investment banking (structural reform).
• Implemented a series of improvements to refine our implementation of the Solvency II regime.
• Continued to support financial stability through our policy development and implementation of various initiatives, eg implementing the systemic risk buffer and monitoring the FPC’s loan to income flow limit.

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• Explored how the implementation of new technologies could impact the safety and soundness of the firms we supervise.
• Extended the Senior Managers and Certification Regime to insurance firms.
• Used our statutory powers to conduct investigations and initiate enforcement action where needed to tackle threats to safety and soundness in PRA-authorised firms.
• Continued to look ahead and perform horizon scanning to pre-empt and mitigate risks to our objectives.

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• Continued to assess the financial resilience of firms through our supervision at firm and sector level.
• Contributed to the work of the Basel Committee on Banking Supervision as it finalised revisions to the market risk framework, and continued to support the International Association of Insurance Supervisors in the development of the Insurance Capital Standard.
• Consulted on proposals to enhance banks’ and insurers’ approaches to managing the financial risks from climate change.
• Collaborated with the Bank’s Financial Stability Directorate to deliver the annual concurrent stress test for the banking sector, and worked with insurance firms following the European Insurance and Occupational Pensions Authority’s stress test exercise.

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• Published a joint Discussion Paper with the Bank and FCA on how the operational resilience of the financial services sector could be enhanced.
• Continued, jointly with the FCA, to undertake threat intelligence-led cyber penetration tests (known as CBEST) on the largest firms.
• Ran a cyber exercise for over 400 individuals from 33 organisations including banks, authorities, and financial market infrastructures, with the scenario involving the crystallisation of a large-scale cyber threat in the UK.

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• Published proposals with the Bank to introduce a Resolvability Assessment Framework (RAF) for banks.
• Implemented operational continuity in resolution rules.

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• Facilitated entry in the insurance sector by setting up, jointly with the FCA, the New Insurer Start-up Unit, building on our experience with the New Bank Start-up Unit.
• Extended the leverage ratio framework to ring-fenced banks whose groups are already subject to the leverage ratio on a consolidated basis.

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• Delivered activity to ensure a fully functioning legal and regulatory framework for financial services, including in the event that the UK left the EU without a deal.
• Prioritised activity to reduce risks to firms’ safety and soundness as the UK prepares to leave the EU covering work across policy development, authorisation, and supervision.

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• Continued to make improvements to data storage and analytics to support our assessment of firms’ safety and soundness, for example the implementation of new tools for the collection and analysis of structural reform data which led to the creation of a new suite of supervisory reports.
• Continued to co-ordinate with the FCA across a range of supervisory and policy matters.
• Feedback from firms gave us assurance on the effectiveness and quality of our supervisory framework and approach.

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Related publications

The Bank of England’s Annual Report and Accounts is available here. Today we also published the:

• PRA Authorisations Performance Reports 2017/18 and 2018/19
• Prescribed Persons (Reports on Disclosures of Information) Regulations 2017 - Annual Report 2018/19
• list of ring-fenced bodies as at 1 January 2019, available at the Which firms does the PRA regulate? page