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PRU 8.5 1Third-country groups

Application

PRU 8.5.1R

PRU 8.5 applies to every firm that is a member of a third-country group. But it does not apply to:

  1. (1)

    an incoming EEA firm; or

  2. (2)

    an incoming Treaty firm; or

  3. (3)

    a UCITS qualifier; or

  4. (4)

    an ICVC.

Purpose

PRU 8.5.2G

PRU 8.5 implements in part Article 18 of the Financial Groups Directive and Article 56a of the Banking Consolidation Directive.

Equivalence

PRU 8.5.3G

The first question that must be asked about a third-country financial group is whether the EEA regulated entities in that third-country group are subject to supervision by a third-country competent authority, which is equivalent to that provided for by the Financial Groups Directive (in the case of a financial conglomerate) or the EEA prudential sectoral legislation for the banking sector or the investment services sector (in the case of a banking and investment group). Article 18(1) of the Financial Groups Directive sets out the process for establishing equivalence with respect to third-country financial conglomerates and the first three paragraphs of Article 56a of the Banking Consolidation Directive does so with respect to third-country banking and investment groups.

Other methods: General

PRU 8.5.4G

If the supervision of a third-country group by a third-country competent authority does not meet the equivalence test referred to in PRU 8.5.3 G, competent authorities may apply other methods that ensure appropriate supervision of the EEA regulated entities in that third-country group in accordance with the aims of supplementary supervision under the Financial Groups Directive or consolidated supervision under the applicable EEA prudential sectoral legislation.

Supervision by analogy: introduction

PRU 8.5.5G

If the supervision of a third-country group by a third-country competent authority does not meet the equivalence test referred to in PRU 8.5.3 G, a competent authority may, rather than take the measures described in PRU 8.5.4 G, apply, by analogy, the provisions concerning supplementary supervision under the Financial Groups Directive or, as applicable, consolidated supervision under the applicable EEA prudential sectoral legislation, to the EEA regulated entities in the banking sector, investment services sector and (in the case of a financial conglomerate) insurance sector.

PRU 8.5.6G

The FSA believes that it will only be right to adopt the option in PRU 8.5.5 G in response to very unusual group structures.

PRU 8.5.7G

PRU 8.5.8 R and PRU 8.5.9 R and PRU 8 Ann 2R set out rules to deal with the situation covered in PRU 8.5.5 G. Those rules do not apply automatically. Instead, they can only be applied with respect to a particular third-country group through the Part IV permission of a firm in that third-country group. Broadly speaking the procedure described in PRU 8.4.22 G also applies to this process.

1Supervision by analogy: rules for third-country conglomerates

PRU 8.5.8R

1 If the Part IV permission of a firm contains a requirement obliging it to comply with this rule with respect to a third-country financial conglomerate of which it is a member, it must comply, with respect to that third-country financial conglomerate, with the rules in Part 1 of PRU 8 Ann 2R, as adjusted by Part 3 of that annex.

1Supervision by analogy: rules for third-country banking and investment groups

PRU 8.5.9R

1 If the Part IV permission of a firm contains a requirement obliging it to comply with this rule with respect to a third-country banking and investment group of which it is a member, it must comply, with respect to that third-country banking and investment group, with the rules in Part 2 of PRU 8 Ann 2R, as adjusted by Part 3 of that annex.