On 29 November 2024, PRA published PS19/24 – Strong and Simple Framework: The definition of an Interim Capital Regime (ICR) firm
Background:
This policy statement clarifies how eligible firms can become part of the Interim Capital Regime (ICR). By joining the ICR, these firms will be able to maintain their existing capital requirements until the implementation of the Small Domestic Deposit Taker (SDDT) capital regime, which is scheduled for January 1, 2026. This allows them to align with the Basel 3.1 standards outlined in previous policy statements (PS17/23 and PS9/24). This policy statement provides the official definition of an ICR firm, which allows the PRA to modify its rules and allow firms to be subject to the ICR through the ICR Modification by Consent (MbC). The final rules for the ICR definition, as well as the process for firms to enter and exit the ICR, are outlined in the appendices of this policy statement
CP is applicable to:
This PS should be of interest to ICR-eligible firms and firms that are considering becoming an ICR firm, and entities that do business with ICR-eligible firms.
Changes to the draft policy:
The PRA received 14 responses to the ICR proposals mentioned in CP16/22. In Chapter 8 of PS17/23, the PRA provided feedback on those responses and outlined the changes made to the initial policy draft.
- Compared to what was proposed in CP16/22, PS17/23 set out some minor changes to Annexes A and B of the ICR instrument. These changes are not expected to have any meaningful effect on the impact of the policy on ICR firms.
- When implementing the Basel 3.1 standards based on the consultation in CP16/22, the PRA is obligated to comply with the legal requirements outlined in FSMA 2000. This policy statement has been developed by the PRA in accordance with these obligations.
- In CP16/22, the PRA provided an explanation of how the proposed rules in the consultation paper aligned with its objectives and regulatory principles. In PS17/23, the PRA updated this explanation to reflect any changes made to the draft policy based on the feedback received during the consultation.
- When making CRR Rules and certain rules applying to holding companies, the PRA must consider and consult HM Treasury (HMT) about the likely effect of the rules on relevant equivalence decisions and has done so.
- Furthermore, when creating CRR rules or rules for specific holding companies, the PRA is required to provide a summary of the purpose of these rules. The purpose of these proposed rules is to grant eligible firms access to the ICR through modifications to the existing rules that apply to them
Implementation and next steps:
The rules regarding the definition of an ICR firm, and the process for eligible firms and consolidation entities to become ICR firms and ICR consolidation entities, will come into effect on November 29, 2024. This also includes changes to the PRA Rulebook Glossary, application rules, and definitions.
