On May 21, 2015, the PRA published a consultation paper which includes a draft supervisory statement on the PRA's expectations for board governance. The purpose of the supervisory statement would be to identify those aspects of board governance to which the PRA attaches particular importance and on which the PRA is likely to focus during the course of supervision. The draft statement confirms the PRA's view that the accountability of Senior Managers under the new Senior Manager Regime would be additional and complementary to the collective responsibility of the board members.
The proposed supervisory statement would apply to all PRA-regulated firms—banks, insurance firms, certain large investment firms and credit unions. However, the PRA recognizes that different governance models apply depending on the nature and size of the firm and that the degree of supervisory attention may vary from firm to firm depending on the risk profile of the firm and the potential impact of failure of a firm. The PRA's judgments on the adequacy of governance arrangements may also be influenced by a firm's recovery and resolution strategy, including (i) the extent to which the PRA is satisfied that the board of a material subsidiary can demonstrate that it is capable of independent action; (ii) culture; (iii) management incentives and business goals of the firm; and (iv) the extent to which those may differ from the PRA's statutory objectives.
The draft supervisory statement covers: setting strategy, culture, risk appetite and risk management, board composition, the respective roles of executive and non-executive directors, knowledge and experience of non-executive directors, board time and resources, management information and transparency, succession planning, remuneration, subsidiary boards and board committees. Responses to the proposed supervisory statement are due by September 14, 2015. There is no indication of when the PRA expects to publish the final supervisory statement.
The consultation paper is available at: http://www.bankofengland.co.uk/pra/Documents/publications/cp/2015/cp1815.pdf.
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