The PRA would expect branches of international banks operating in the UK to focus primarily on wholesale banking activities. However, it has additional expectations where such branches are systemically important.
In assessing whether a branch is systemically important, the PRA looks at whether the overall UK footprint of the branch exceeds an average of £15 billion total gross assets. In calculating this footprint, the PRA will take account both of assets booked onto the balance sheet of the branch and assets traded or originated in the UK but booked remotely to another jurisdiction. The PRA mentions that the £15 billion threshold is “only indicative” and that its determination will also take into account the scale of provision of critical functions (as described in PRA Supervisory Statement 10/14 as “critical economic functions”) the branch undertakes and links to other PRA-regulated firms.
In addition to the regulatory equivalence and supervisability considerations mentioned above, the PRA would also assess the degree of influence and visability that it has over the supervisory outcomes for the bank as a whole and the wider group. This factor becomes more important where group structures become more complex.
Where the PRA is not satisfied as to the degree of supervisability of the branch, or it does not have the necessary degree of influence and visability it needs to achieve its general objectives it can apply specific regulatory requirements on the branch on a case-by-case basis. The PRA states in CP29/17 that such requirements would be intended to ensure that there are sufficient financial and operational resources, and appropriate governance, at the UK branch level.
However, in instances where exercising such powers would still not allow the PRA to achieve its general objectives the bank would be outside the PRA’s risk appetite for branches and the regulator would likely require the bank to establish a subsidiary in the UK.