PRA decided to maintain the Systemic Risk Buffers of firms at the rate set in December 2019 for a further year until December 2022, with no rate changes taking effect until January 2024. This decision has been taken, with the support of the Financial Policy Committee (FPC), in response to the economic shock from COVID-19 pandemic. As part of the implementation of the revised Capital Requirements Directive (CRD5), the CRD IV Systemic Risk Buffer will be replaced by the Other Systemically Important Institutions (O-SII) buffer on December 29, 2020. The O-SII buffer will be set at the same rate as the current Systemic Risk Buffer of firms.
PRA is acting now to offer lenders more certainty over their future capital requirements. This decision is relevant only to ring-fenced bodies and large building societies that will be subject to the O-SII buffer. PRA will now reassess O-SII rates of firms in December 2022, based on balance sheet positions at the end of 2021. Scheduling the next reassessment of O-SII buffer requirements for December 2022 at the earliest will aid firms in their capital planning by taking pressure off end-2020 balance sheets (on which the December 2021 reassessment would have been based). Any decision taken in December 2022 on O-SII rates would take effect from January 2024 in line with its policy. PRA also reiterated its expectation that all elements of capital and liquidity buffers of banks can be drawn down as necessary to support economy through this shock. This is in line with the PRA commitment, in April 2020, to consider the growth of balance sheets of firms in context of the pandemic and the extent to which the balance sheets are temporarily inflated.
Keywords: Europe, UK, Banking, Systemic Risk Buffer, Systemic Risk, O-SII, CRD5, COVID-19, Regulatory Capital, Basel, PRA
Previous ArticleIAIS Updates List of Internationally Active Insurance Groups in 2020
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The tech lab of the Federal Deposit Insurance Corporation (FDIC) selected three winning teams in a tech sprint designed to explore new technologies and techniques to help banks meet the needs of unbanked consumers.
The Monetary Authority of Singapore (MAS) launched a consultation on the standards for market risk capital and the associated reporting requirements for banks incorporated in Singapore.
PRA published a "Dear CEO" letter that sets out findings of a review on the reliability of regulatory reporting and reiterates the supervisory expectations on regulatory reporting.
The Australian Prudential Regulation Authority (APRA) confirmed that its new data collection solution APRA Connect will go live on September 13, 2021.
The Federal Reserve System (FED) published a paper describing the landscape of partnerships between community banks and fintech companies.
The Federal Deposit Insurance Corporation (FDIC) has chosen four companies—Novantas Inc, Palantir Technologies Inc, PeerIQ, and S&P Global Market Intelligence LLC—to propose a pilot consisting of testing new reporting and analytical tools with a small group of FDIC-supervised institutions on a voluntary basis.
The Prudential Regulatory Authority (PRA), via the consultation paper CP18/21, proposed changes to the applicable requirements on the identification of material risk-takers for the purposes of the remuneration regime.
The Joint Committee of European Supervisory Authorities (ESAs) published its second 2021 joint risk assessment report for the financial sector.