On 1 September 2020, the Bank of England (BoE) published a new webpage, which summarises its approach to the Temporary Permissions Regime (TPR). On this new webpage the BoE has confirmed the following:
- Firms that have submitted a valid Notification or Part 4A application (and not withdrawn) will automatically enter the TPR.
- Where a firm authorised to carry on regulated activities in the UK through Freedom of Establishment (FOE) or Freedom of Services (FOS) passporting will obtain a deemed Part 4A permission to carry on those activities for up to a maximum of three years from the end of the transition period, subject to HM Treasury’s power to extend the duration of the regime by increments of 12 months. A passporting firm that already has a top-up permission would obtain a deemed variation of that permission.
- That firms must be operationally prepared to enter the TPR and able to meet the regulatory requirements that will apply to them once they are in the TPR.
More broadly, the BoE’s new webpage provides firms with information on the following:
- BoE’s supervisory approach: Firms that are in the TPR with a branch in the UK will be required to comply with the same rules that apply to other third country branches (subject to any transitional relief applicable under the TPR). Firms in the TPR without a branch in the UK (cross-border service providers), a more limited set of rules will apply.
- Threshold conditions: Firms are not required to demonstrate that they satisfy Threshold Conditions (TCs) in order to enter the TPR and receive a deemed Part 4A permission. However, once a firm is in the TPR they will be required to notify the BoE if they become aware (or have information that reasonably suggests) that they have failed to satisfy one or more TCs, may have done so, or may do so in the foreseeable future. It will be open to the Prudential Regulation Authority (PRA) or Financial Conduct Authority (FCA) to take appropriate action thereafter.
- Financial Services Compensation Scheme (FSCS) protection (insurance): Insurers that are “relevant persons” for purposes of the Policyholder Protection Part of the PRA Rulebook (including TPR, Supervised Run-Off (SRO) and Contractual Run-Off (CRO) insurers following the end of the transition period) will be required to pay FSCS levies in respect of policies that are protected by the FSCS. No transitional relief is available.
- Financial Services Compensation Scheme protection (banking): Once in the TPR, a UK branch of a deposit-taker will automatically become a member of the FSCS and will be required to comply immediately with the Depositor Protection Part of the PRA Rulebook (including the UK’s depositor awareness and notification requirements, Single Customer View (SCV) requirements, and payment of levies). No transitional relief is available.
- Senior Managers and Certification Regime: All firms in the TPR (including cross-border service providers) are required to have an individual approved to perform the Head of Overseas Branch function (Senior Management Function (SMF) 19). Firms are encouraged to apply for the necessary approval(s) as soon as possible and within six weeks from the end of the transition period.
- Status Disclosure (retail banking firms only): Firms in the TPR are required to include specific status disclosure wording in their communications with retail clients, both written and electronic (to indicate that firms are in the regime). However, the BoE is intending to grant firms in the TPR a three month transitional relief in respect of the requirement to use specific, bespoke wording for their status disclosures to retail customers. During those three months of transitional relief, firms would be able to use either the existing wording for European Economic Area firms or the new prescribed wording.
The TPR is due take effect at 11pm on Thursday 31 December 2020, which is the point at which the transition period agreed as part of the Withdrawal Agreement between the UK and European Union (EU) will end. The BoE have acknowledged that firms entering the TPR may find it challenging to immediately. BoE supervisors will continue to communicate with firms to understand progress on preparing to meet the regulatory requirements that will apply when a firm has obtained deemed Part 4A permission and specifically the points noted above.