Prudential Regulation Authority Rulebook

Examples of scenarios in which the PRA may consider the exercise of its power of direction include, but are not limited to:

• Insufficient quality or quantity of own funds or liquid assets or other assets that are made available to the authorised firms to meet their solo requirements.
• Intra-group transactions and allocation of risks and financial resources (including large exposures, booking practices, other channels of contagion and arrangements for the mitigation of risk such as by reinsurance) which do not meet the standards expected by the PRA.
• Group-wide recovery plans which do not meet the standards expected by the PRA.
• Where there are barriers to the resolution of a firm or group that are most appropriate to mitigate or remove at the level of the parent undertaking.
• Where action at the level of the parent undertaking is required to improve resolvability.
• Group-wide remuneration policies which do not meet the standards expected by the PRA.
• A proposed acquisition by the parent undertaking which may affect compliance with consolidated or group requirements or the solo requirements of any authorised firm in the group.
• Where the actions of the parent undertaking in a recovery or resolution scenario may increase the chance of disorderly failure or the use of taxpayer funds.
• Scenarios where the parent undertaking moves, or may move, impaired, sub-standard or high-risk assets into an authorised firm with a view to allowing that firm to fail or be taken into resolution whilst the rest of the group carries on as a going concern, potentially leaving the failed firm in the group to be supported by taxpayers.
• Where only the actions of a parent undertaking in relation to one of its unauthorised subsidiaries may maintain the stability of the authorised firms, particularly in stressed circumstances (eg where an authorised firm is reliant on services provided by an unauthorised sister company).
• Where risks generated in an unauthorised part of the group could affect the stability of either the authorised firms or the group as a whole.
• Insufficient quality or quantity of own funds or liquid assets or other assets being available to meet consolidated group requirements.
• Insufficient transferability of a group’s own funds or liquid assets to support the group’s regulated activities.
• Complex or opaque group structures which hinder the authorised firm’s and/or the PRA’s ability to assess and manage the risks generated by the authorised firm’s membership of its group.
• Group-wide risk management or governance arrangements, including those relating to directors, that do not meet the PRA and/or internationally agreed standards.
• Systems and controls to manage group risks which do not meet the standards expected by the PRA.