Featured Product

    PRA Updates the Policy on Approach to Systemic Risk Buffer

    December 13, 2018

    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

    Featured Experts
    Related Articles
    News

    EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio

    EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.

    November 19, 2020 WebPage Regulatory News
    News

    ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs

    In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.

    November 19, 2020 WebPage Regulatory News
    News

    IASB Begins First Phase of Post-Implementation Review of IFRS 9

    IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Report Examines Progress in Resolvability of Systemic Institutions

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.

    November 18, 2020 WebPage Regulatory News
    News

    EBA Benchmarks National Insolvency Frameworks Across EU

    EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Reports Assess Impact of Pandemic on Financial Stability

    FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.

    November 17, 2020 WebPage Regulatory News
    News

    RBNZ Consults on Implementation of Capital Review Changes

    RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.

    November 17, 2020 WebPage Regulatory News
    News

    IASB Announces Andreas Barckow as the New Chair from July 2021

    The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.

    November 17, 2020 WebPage Regulatory News
    News

    HKMA Consults on Capital Rules for Bank Equity Investments in Funds

    HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.

    November 17, 2020 WebPage Regulatory News
    News

    ESRB Supports Extension of Macro-Prudential Measure by Swedish FSA

    ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).

    November 17, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6153