PRA and FCA consult on updates to guidance on the prudential assessment of acquisitions and increases in control

The PRA and the FCA have opened a consultation (CP25/23) on plans to replace the EU's non-binding guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector (3L3 Guidelines). 

Under the regulators’ plans, which will be relevant to all PRA and FCA authorised firms, persons to which the change in control FSMA part applies, and firms seeking PRA authorisation:

• the 3L3 Guidelines – which the PRA and FCA have generally expected firms to continue applying following Brexit – will be replaced with a new PRA supervisory statement and FCA guidance; and
• the PRA will delete its existing supervisory statement on the aggregation of holdings for the purpose of the prudential assessment of controllers, as well as references to the 3L3 Guidelines in its statement of policy on the interpretation of EU guidelines and recommendations.

The 3L3 Guidelines lay down the five criteria to be applied consistently by competent authorities as part of the assessment process, as well as the assessment procedure and information for acquirers to include in their submissions. The PRA and FCA have generally adhered to these guidelines, other than in respect of the aggregation of indirect holdings. 

There are not expected to be many radical departures from the 3L3 Guidelines in the new PRA and FCA publications, albeit there will be certain key differences. These include:

• a new section – PRA approach to the use of conditional approvals to advance its objectives – will offer guidance as to when the PRA or the FCA may use conditional approvals (where doing so would advance their objectives). This proposal follows the recent granting of power to the PRA and FCA to grant conditional approvals if desirable to advance the regulators’ objectives;
• different examples in the Significant influence section of scenarios that may indicate whether a person is able to exercise significant influence over a target firm (based on real-world PRA and FCA specific examples);
• a revised Aggregation of holdings section to reflect that neither the PRA or FCA complied with the 3L3 Guidelines in this regard (on the basis that the approach to the aggregation of indirect holdings in the 3L3 Guidelines was inconsistent with FSMA).  In any event, the majority of the proposed text in the new supervisory statement is drawn from the existing PRA statement.

The deadline for responses to the consultation is 23 February 2024. The proposals are then expected to be implemented in summer 2024.