PRA issued a letter explaining its supervisory focus and priorities for credit unions during the period of stress caused by the COVID-19 outbreak. The letter informs about the regulatory reporting extensions granted to credit unions and sets out the details of a PRA rule modification available to all credit unions until January 01, 2021. Credit unions have the option to consent to this modification such that the minimum provisioning requirements for bad debt will be reduced in line with the rates set out in the letter. Additionally, BoE announced that the Term Funding Scheme with additional incentives for Small and Medium-Size Enterprises (TFSME) will open for drawings on April 15, 2020. The scheme allows eligible banks and building societies to access four-year funding at rates very close to the Bank Rate and supports households and businesses during this period of economic disruption.
PRA has consistently stressed the importance of sound governance, risk management, and general prudence in its past communications with the credit union sector. The letter states that it is crucial for credit unions to be mindful of these principles, especially in light of the current challenges. PRA is mindful of the operational challenges that may make certain aspects of credit union operations and compliance increasingly challenging. Thus, PRA will accept delayed submission for regulatory reports due on or before May 31, 2020. A two-month extension is being granted for annual returns and accounts. A one-month extension is being granted for quarterly returns. However these extensions should only be utilized where a credit union is experiencing challenges.
Additionally, where a credit union is either already below its capital requirement or projects to be so, it should notify PRA immediately as required by the Credit Union Rulebook Part 8.6. On receipt of that notification, PRA will engage with credit unions on a case-by-case basis. The starting point for that supervisory dialog is to seek assurance from the credit union on its plan to restore its capital. PRA also highlights that credit unions should be mindful of the liquidity requirements and that it expects credit unions to consider their specific liquidity situation, along with the associated risks, and act accordingly. PRA reiterates that it expects all credit unions to be mindful of their continuing and existing regulatory requirements, as set out in the PRA Credit Union Rulebook Part. PRA rules set out obligations with respect to credit risk management, credit control, record-keeping and the collection of adequate management information.
- Notification on Letter to Credit Unions
- Letter to Credit Unions (PDF)
- Press Release on Funding Scheme
Keywords: Europe, UK, Banking, COVID-19, SME, Credit Unions, Reporting, Reporting, Regulatory Capital, Liquidity Risk, Term Funding Facility, PRA, BoE
Previous ArticleMAS Amends Notices on NSFR and Guide on Margin Rules for Derivatives
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.