Risk control—financial services firms

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Risk control—financial services firms
  • Risk control rules applying to UK financial services firms
  • Application of risk control rules
  • General requirement for effective risk control processes
  • Risk assessment
  • Risk management
  • Reverse stress testing
  • Remuneration for risk management function
  • Credit and other risks
  • Additional requirements for CRR firms
  • More...

Risk control—financial services firms

This Practice Note examines the rules and guidance on risk control (the risk control rules) which apply to firms as set out in:

  1. Commission Delegated Retained Regulation (EU) 2017/565 (the UK MiFID II Organisational Regulation), a Level 2 measure under Retained Directive 2014/65/EU (UK MiFID II), and

  2. the Senior Management Arrangements, Systems and Controls sourcebook in the Financial Conduct Authority (FCA) Handbook (SYSC), and the Prudential Regulation Authority (PRA) Rulebook

UK MiFID II and the UK MiFID II Organisational Regulation apply in the UK as of IP completion day (31 December 2021).

Risk control rules applying to UK financial services firms

The rules and guidance on risk control (the risk control rules) which apply to firms are set out in:

  1. Article 23 of the UK MiFID II Organisational Regulation

  2. the general requirement to have effective risk control processes in SYSC 4.1.1R

  3. SYSC 7

  4. SYSC 21 Risk control: guidance on governance arrangements

Dual-regulated firms should also take note of the parallel rules in the following parts of the PRA Rulebook:

  1. Risk Control (which applies to CRR firms, as defined in the PRA Rulebook Glossary)

  2. Group Risk Systems (which applies to CRR firms), and

  3. Credit Unions—11 General organisational requirements (which applies to credit unions)

Further guidance for PRA-regulated firms is set out in PRA Supervisory Statement Internal governance (SS21/15), updated in April 2017.

In this Practice Note,

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