PRA Decides to Maintain Systemic Risk Buffer Rates Until Next Review
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.
Related Links
Keywords: Europe, UK, Banking, Systemic Risk Buffer, Systemic Risk, O-SII, CRD5, COVID-19, Regulatory Capital, Basel, PRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
IAIS Updates List of Internationally Active Insurance Groups in 2020Related Articles
EBA Sets Out Standards for Pillar 3 Disclosures of ESG Risks
The European Banking Authority (EBA) published the final draft implementing technical standards on Pillar 3 disclosures on environmental, social, and governance (ESG) risks.
EBA Proposes Guidelines on Remuneration Benchmarking, High Earner Data
The European Banking Authority (EBA) proposed to update the guidelines on the data collection exercise on high earners and the remuneration benchmarking exercise under the Capital Requirements Directive (CRD).
MAS Issues Updates on Its Activities: Ravi Menon Becomes NGFS Chair
The Network for Greening the Financial System (NGFS) announced the appointment of Mr. Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS), as its new Chair for a two-year term.
CBIRC Issues Rules on Related-Party Transactions and Outsourcing Risks
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules on related-party transactions and outsourcing risks.
OSFI Issues Results of Pilot on Climate Risk Scenario Analysis
The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.
EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR
The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).
BIS Tests CBDC with Banks; FIS Examines Tech Firm Licensing Regime
The Bank of International Settlements (BIS) announced successful test integration of wholesale central bank digital currency (CBDC) settlement with commercial banks, as part of the Project Helvetia.
ECB Issues Opinions on Green Bonds Standard and CRR Proposals
The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.
ESRB Explores Policy Response to Risks Arising from Digitalization
The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.
HKMA Consults on FIRO Code, Revises Policy on Foreign Exchange Risk
The Hong Kong Monetary Authority (HKMA) is consulting on the draft Financial Institutions (Resolution) Ordinance (Cap. 628), or FIRO, Code of Practice chapter on liquidity and funding in resolution, until March 14, 2022.
