PRA Updates the Policy on Approach to Systemic Risk Buffer
PRA published the final Statement of Policy on the PRA approach to the implementation of the systemic risk buffer (SRB), as proposed in the consultation paper CP29/18. As part of this update, PRA also updated the policy statement PS32/18, which is relevant to ring-fenced bodies within the meaning of section 142A of the Financial Services and Markets Act 2000 and large building societies that hold more than GBP 25 billion in deposits (where one or more of the account holders is a small business) and shares (excluding deferred shares)—jointly known as the "SRB institutions." The effective date for these changes is December 13, 2018.
In CP29/18, PRA had proposed to do the following:
- Remove the statement that PRA’s approach to reviewing the Statement of Policy every two years is mandated by the SRB regulations
- Replace references to CP25/16 with the corresponding PRA Statement of Policy on its methodologies for setting Pillar 2 capital, following publication of the final policy
- Include references to Supervisory Statement 45/15 titled ‘The UK leverage ratio framework," which was recently updated with respect to the application of an additional leverage ratio buffer (ALRB) rate to SRB institutions
PRA had received no responses to the consultation. Therefore, PRA has made no changes to the draft policy consulted on in the consultation paper. However, PRA changed footnote 11 in the Statement of Policy to update references to the Delegated Regulation (EU) No 1222/2014. The Statement of Policy was also updated to simplify the formatting and aid readability, including sequential numbering of footnotes, the updating of hyperlinks to reflect the location of materials on the BoE website, and to make hyperlinks more easily identifiable. SRB is intended to increase the capacity of the UK domestic systemically important ring-fenced bodies and building societies to absorb stresses, thus increasing their resilience relative to the system and promoting the safety and soundness of the PRA-regulated firms. SRB is a firm-specific buffer that is based on a firm’s worldwide risk-weighted exposures and each firm will be required to ensure that it is met solely with the common equity tier 1 capital.
In line with the recommendations of the Independent Commission on Banking, the UK legislation implementing the SRB Regulations requires the Financial Policy Committee (FPC) to establish a framework for an SRB that applies to large building societies and ring-fenced bodies. The SRB Regulations require PRA to apply that framework from January 01, 2019. FPC published "The Financial Policy Committee’s framework for the systemic risk buffer" (the SRB framework) in May 2016. Alongside the FPC framework, this Statement of Policy will form BoE's broader framework for SRB. PRA will review this Statement of Policy at least every two years.
Related Links
Effective Date: December 13, 2018
Keywords: Europe, UK, Banking, Systemic Risk Buffer, SRB Regulation, Ring Fencing, PS32/18, CRR/CRD, PRA
Previous Article
BDE Publishes Technical Instructions for Reporting by BanksRelated Articles
|
News
HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.
April 16, 2019
WebPage
Regulatory News
|
|
News
EP Approves Agreement on Package of CRD 5, CRR 2, BRRD 2, and SRMR 2The European Parliament (EP) approved the final agreement on a package of reforms proposed by EC to strengthen the resilience and resolvability of European banks.
April 16, 2019
WebPage
Regulatory News
|
|
News
FDIC Consults on Approach to Resolution Planning for IDIsFDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.
April 16, 2019
WebPage
Regulatory News
|
|
News
EP Resolution on Proposal for Sovereign Bond Backed SecuritiesThe European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).
April 16, 2019
WebPage
Regulatory News
|
|
News
PRA Seeks Input and Issues Specifications for Insurance Stress TestsPRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019.
April 15, 2019
WebPage
Regulatory News
|
|
News
PRA Finalizes Policy on Approach to Managing Climate Change RisksPRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix).
April 15, 2019
WebPage
Regulatory News
|
|
News
EBA Single Rulebook Q&A: First Update for April 2019EBA published answers to nine questions under the Single Rulebook question and answer (Q&A) updates for this week.
April 12, 2019
WebPage
Regulatory News
|
|
News
EIOPA Statement on Application of Proportionality in SCR SupervisionEIOPA published a supervisory statement on the application of proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula.
April 11, 2019
WebPage
Regulatory News
|
|
News
FED Updates Form and Supplemental Instructions for FR Y-9C ReportingFED updated the form and supplemental instructions for FR Y-9C reporting. FR Y-9C is used to collect data from domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies with total consolidated assets of USD 3 billion or more.
April 11, 2019
WebPage
Regulatory News
|
|
News
OSFI Finalizes Guidelines on Liquidity Adequacy and NSFR DisclosuresOSFI published the final Liquidity Adequacy Requirements (LAR) guideline and the net stable funding ratio (NSFR) disclosure requirements guideline.
April 11, 2019
WebPage
Regulatory News
|
