Schedule 3: Prudential regulation of credit institutions etc. Part 2: PRA’s powers in relation to certain holding companies
Part 2 of Schedule 3 provides the PRA with a power to make rules in relation to holding companies approved or designated under Part 12B of FSMA (as introduced through the Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020) and includes these rules within the accountability framework in sections 144C and 144D.
	Section 192XA (which replaces the rule-making power in section 192V inserted into FSMA for the purpose of the transposition of CRD V) sets out which holding companies the PRA can make rules in relation to and the subject matter to which these rules must relate.
	Subsection (1) sets the scope of the PRA’s power to only those holding companies which are approved or designated under part 12B of FSMA, and that the PRA can exercise this power only where it is necessary or expedient to advance any of its objectives (safety and soundness being the PRA’s primary objective).
	Subsection (2) restricts the use of the power to several subject areas. Subsection (2)(a) sets out the focus of the power, which is to secure the application of prudential requirements on a consolidated or sub-consolidated basis, as defined in the CRR to mean requirements which apply at a certain level of a firm’s group structure as if the entirety of that element of the group were one firm. Subsections (b) to (f) are self-explanatory and ensure that the PRA can effectively make rules to impose necessary requirements for the implementation of Basel standards indulging rules needed to mitigate risks that could affect the group beyond consolidated and sub-consolidated requirements.
	Subsections (3), (4) and (5) replicate section 144H for rules made in relation to approved holding companies.
	Subsection (6) applies section 137H of FSMA where the PRA makes rules relating to holding companies. This will allow remuneration provisions in employment contracts issued by holding companies in breach of rules to be voided, and payments made under the void provision to be clawed back.
	Subsection (7) gives HM Treasury the power to direct the PRA to consider whether the remuneration policies of those holding companies comply with the regulator’s rules. HM Treasury is obliged to consult with the regulator before issuing them with a direction to undertake a review.
	Subsection (8) ensures that consequential amendments of references to rules as under section 141A can be made in relation to rules made under section 192XA.
	Subsection (9) sets out definitions to be used in this section, in particular, that group risk relates to risk that adversely affect the financial position of a holding companies arising from the relationships between the holding company and other members of its group and other matters.
	Section 192XB sets out that, where section 192XA rules are CRR rules, Part 9D applies, and that where these rules are not CRR rules (i.e. they do not relate to a CRR revocation or a CRR Basel Standard) the accountability framework set out in section 144C, the reporting requirements in section 144D, and some of the exemptions from the accountability framework in section 144E continue to apply. The elements of these sections which do not apply are those which are specific to CRR rules, i.e. that are only triggered where a section of the CRR is revoked, which cannot occur where the rules are not CRR rules.
	Section 192XC replicates section 144G for section 192XA rules.
	Paragraph 8 of Part 2 amends section 192Y of FSMA in order to allow the PRA to take disciplinary action against a holding company for contravention of any Part of the CRR or instruments made under that Regulation, rather than just breaches of certain parts of the CRR.