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UK: Proposal for new PRA Fundamental Rules
Nine Proposed FRs
The FRs will form the foundation of the PRA's Rulebook and are drafted to be "short and memorable". The proposed FRs are as follows:
FR2 – A firm must act with due skill, care and diligence.
FR3 – A firm must act in a prudent manner.
FR4 – A firm must at all times maintain adequate financial resources.
FR5 – A firm must have in place sound and effective risk strategies and risk management systems.
FR6 – A firm must organise and control its affairs responsibly and effectively.
FR7 – A firm must deal with its regulators in an open, co-operative and timely way and must appropriately disclose to the PRA anything relating to the firm of which the PRA would reasonably expect notice.
FR8 – A firm must prepare for resolution so, if the need arises, it can be resolved in an orderly manner with a minimum disruption of critical services.
FR9 – A firm must not knowingly or recklessly give the PRA information that is false or misleading in a material particular.
Like the Principles, the FRs will be high level and will act as overarching requirements which apply at all times with other rules amplifying the core expectations of the FRs. As the FRs apply at all times, they can be relied upon by the PRA where no other PRA rule exists. The FRs leave scope for insurers to achieve compliance in the way they consider adequate and so encourage insurers to exercise judgment and take responsibility for what it means for their business.
FR8 – Resolution
FR8 has particular significance for insurers as it introduces a requirement for resolution planning. The PRA expects insurers to provide all information needed for the PRA to perform an assessment of their resolvability. Where significant barriers to resolvability are identified, adequate changes to reduce barriers where possible should be proposed and implemented by the insurer.
The deadline for responses is 21 March 2014. Final versions of the rules are expected to appear later in 2014.
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