The Prudential Regulation Authority (PRA) published the consultation paper CP5/22 in context of the development a "simpler regime" for the smallest firms, with the comment period for this consultation ending on July 22, 2022.
PRA sets out proposals to introduce a definition of the "Simpler-regime Firm" in the PRA Rulebook, with the implementation of this proposed definition expected to be the first step in designing a strong and simple prudential framework for banks and building societies that are neither systemically important nor internationally active. The proposals in the consultation paper relate to a definition of a type of firm—a Simpler-regime Firm—that would be subject to a simpler, but robust, set of prudential rules in the future. These rules will further enhance proportionality of the PRA regulatory framework, while maintaining firms’ safety and soundness. In addition to developing its proposals for the application of simplified prudential requirements to Simpler-regime Firms, PRA intends to consider whether and how these small firms should be in scope of application of other future prudential requirements, including the Basel 3.1 reforms, on which PRA intends to consult in the fourth quarter of this year. PRA intends to consult on an approach that would enable Simpler-regime Firms to remain subject to requirements substantially the same as the currently applicable UK Capital Requirements Regulation (CRR) during any interim period between the PRA’s implementation of Basel 3.1 and the implementation of measures under the simpler regime. PRA also intends to consult on permitting a firm that meets the Simpler-regime Firm definition to choose to be subject without delay to the PRA implementation of the Basel 3.1 reforms.
PRA plans to publish proposals for simplified prudential requirements under the simpler regime in two distinct phases. In Phase 1, PRA will focus mainly on aspects of prudential regulation that are not related to capital requirements (for example, liquidity regulation). However, in Phase 2, PRA will focus mainly on capital requirements. PRA expects to publish proposals in Phase 1 within the first half of 2023, with the second set of proposals (in Phase 2) likely to follow in 2024. Also, PRA intends to publish a policy statement on the definition of a Simpler-regime Firm later in 2022 or early 2023.
Keywords: Europe, UK, Banking, Basel, Reporting, CRR, PRA Rulebook, Simpler-Regime Firm, Regulatory Capital, CP5 22, PRA, Proportionality, Headline
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