Featured Product

    PRA Review Finds Most Banks Compliant with Regulatory Reporting Rules

    April 30, 2021

    PRA published a letter that sets out findings from the 2020 Internal Audit Review of the Collections function of a sample of non-systemic banks and building societies. The review of the Collections function aimed to provide assurance, to the Boards of these firms and to PRA, about the effectiveness of controls in the areas of collection processes and control environment, governance and oversight, and regulatory reporting. This letter to the Chief Risk Officers of these regulated firms notes that the processes and controls in place for collections operations, from a prudential perspective, are largely adequate and effective across the majority of the firms. Nevertheless, the review identified some improvement areas, resulting in recommendations for these firms.

    The PRA letter summarizes the findings of the review while Annex 1 pf the letter sets out more details on specific areas of interest. The observations reinforce the need for some firms to continue to enhance their collections operations and develop the right level of control and governance to ensure effectiveness, review the adequacy of resources, to efficiently manage the processes, and to ensure adequate oversight at the Board level. In terms of the assessment of processes and controls in place to support Collections functions, 63% of the recommendations relate to weakness in the policy/process documentation and 20% relate to ensuring alignment to regulatory reporting requirements in terms of definitions and rules (that is, FINREP, EBA Non Performing Exposure, Unlikely to pay (UTP), default. In terms of the effectiveness of controls of end-to-end Collections operation, 12% recommendations relate to poor forecast or forward-looking analysis of expected default exposures to predict impact on Collections resources, 11% relate to the remediation of system issues or system migration or lack of validation control checks, 10% relate to weak data control processes for regulatory reporting, and only 3% relate to improvement of IFRS 9 analysis to include the impact of forbearance and arrears (particularly where the ECL model is based on limited collection and forbearance experience).

    Overall, the review showed that the majority of firms were compliant with the regulatory reporting requirements with a few exceptions, mostly on forbearance. Minor inconsistencies were identified between what is disclosed in the Internal Capital Adequacy Assessment Process (ICAAP) and in the regulatory reporting. The submission of complete, timely, and accurate regulatory returns continues to be the foundation of effective supervision; therefore, PRA expects all firms to continue to take action, as necessary, to ensure the integrity of regulatory returns. For this exercise, PRA had selected 42 non-systemic banks and building societies as participants. The firms in scope represented 42% of non-systemic firms’ lending exposures, with 70% of the firms being banks. Fifty-four percent of the firms in scope had a lending book of less than GBP 2 billion, of which 30% was less than GBP 0.5 billion. PRA will continue to monitor firms’ Collections functions in light of the COVID-19 pandemic impact on arrears and forbearance levels.

     

    Related Link: Letter on Review Findings

     

    Keywords: Europe, UK, Banking, Reporting, Governance, ICAAP, IFRS 9, Credit Risk, Basel, Internal Controls, Compliance Risk, PRA

    Featured Experts
    Related Articles
    News

    EC Regulation Sets Out Standards for Reporting and Disclosure of MREL

    EC published the Implementing Regulation 2021/763 that lays down implementing technical standards for supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities (MREL).

    May 12, 2021 WebPage Regulatory News
    News

    APRA Decides to Standardize Submission Date for Quarterly Reporting

    APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.

    May 11, 2021 WebPage Regulatory News
    News

    ECB Working Group Publishes Recommendations on EURIBOR Fallbacks

    The private sector working group of ECB on euro risk-free rates published the recommendations to address events that would trigger fallbacks in the Euro Interbank Offered Rate (EURIBOR)-related contracts, along with the €STR-based EURIBOR fallback rates (rates that could be used if a fallback is triggered).

    May 11, 2021 WebPage Regulatory News
    News

    Bundesbank Publishes Supporting Documentation for Reporting by Banks

    Bundesbank published a list of "EntryPoints" that are accepted in its reporting system; the list provides taxonomy version and name of the module against each EntryPoint.

    May 11, 2021 WebPage Regulatory News
    News

    EBA Publishes Phase 1 of Reporting Framework 3.1

    EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).

    May 10, 2021 WebPage Regulatory News
    News

    APRA to Finalize Capital Adequacy Standard Revisions by January 2022

    Asia Pacific Australia Banking APS 111 Capital Adequacy Regulatory Capital Basel RBNZ APRA

    May 10, 2021 WebPage Regulatory News
    News

    ESMA Issues Guidelines on Outsourcing to Cloud Service Providers

    ESMA published the final guidelines on outsourcing to cloud service providers.

    May 10, 2021 WebPage Regulatory News
    News

    EBA Publishes Data on Deposit Guarantee Schemes

    EBA published annual data for two key concepts and indicators in the Deposit Guarantee Schemes (DGS) Directive—available financial means and covered deposits.

    May 10, 2021 WebPage Regulatory News
    News

    OSFI Sets Out Plan for Future Guidance on Managing Technology Risk

    OSFI has set out the schedule for release of draft guidance on the management of technology risks by federally regulated financial institutions and private pension plans.

    May 10, 2021 WebPage Regulatory News
    News

    MAS Updates Housing Loan Rules, Proposes Corporate Governance Guidance

    MAS updated rules for new housing loans by banks and finance companies.

    May 10, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6964