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
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
APRA is consulting on updates to ARS 210.0, the reporting standard that sets out requirements for provision of information on liquidity and funding of an authorized deposit-taking institution.
FED released hypothetical scenarios for a second round of stress tests for banks.
PRA published updates in relation to the 2021 Supervisory Benchmarking Portfolio exercise.
FED adopted a proposal to extend for three years, with revision, the capital assessments and stress testing reports (FR Y-14A/Q/M; OMB No. 7100-0341).
HKMA revised the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.