Featured Product

    PRA Proposes Updates to Pillar 2A Capital Framework in UK

    February 28, 2020

    PRA is proposing to update the Pillar 2A capital framework to take account of the additional resilience associated with higher macro-prudential buffer requirements in a standard risk environment. In this context, a key aspect of the proposal is to reduce variable Pillar 2A capital requirements. PRA proposes to apply the Pillar 2A reduction, where applicable, at the same time or before the 2% countercyclical capital buffer (CCyB) rate in UK comes into effect on December 16, 2020. This consultation closes on April 30, 2020. The proposed implementation date of the policy in the consultation paper is July 06, 2020.

    The proposals in this consultation only relate to the Financial Policy Committee (FPC) decision of December 16, 2019, to raise the level of the UK CCyB rate that it expects to set in a standard risk environment from in the region of 1% to in the region of 2%. Any subsequent changes in the UK CCyB rate brought about by changes in the FPC's view of the prevailing risk environment would not be reflected in the changes in Pillar 2A. The proposals in this consultation paper would make amendments to supervisory statement (SS31/15) on the Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP). The proposals clarify the considerations related to macro-prudential buffers that PRA takes into account when it carries out an overall assessment of the level of capital that would be sufficient to ensure the sound management and coverage of the risks of firms. 

    This consultation is part of a package that includes review of the structural level and balance of capital requirements for the UK banking system undertaken by FPC; this includes the subsequent increase in the UK CCyB rate that FPC expects to set in a standard risk environment and the clarification of BoE that, in resolution, it expects all debt that is bailed in to be written down or converted to common equity tier 1 (CET1). The purpose of this package is to:

    • Increase resilience—While leaving the overall loss-absorbing capacity for the banking system broadly unaffected, the changes would shift the balance of that capacity toward higher quality tier 1 capital.
    • Improve responsiveness of capital requirements to economic conditions—By shifting the balance of capital requirements from minimum requirements that should be maintained at all times toward buffers that can be drawn down as needed, these changes would mean that banks would be more able to absorb losses while maintaining lending to the real economy through the cycle.
    • Enhance resolvability—The intention of BoE, in resolution, to write down or convert debt to CET1 capital would make resolved banks more resilient to further losses, supporting their resolution and minimizing the wider economic costs of their failure.

    The consultation paper is relevant to the PRA-authorized UK banks, building societies, and designated investment firms.  The proposals have been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time the UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018.

     

    Related Links

    Comment Due Date: April 30, 2020

    Effective Date: July 06, 2020

    Keywords: Europe, UK, Banking, CCyB, Pillar 2A, ICAAP, SREP, CET1, Capital Framework, FPC, Macro-prudential Policy, Resolution Framework, BoE, PRA

    Related Articles
    News

    BCBS Amends Guidelines on Sound Management of AML/CFT Risks

    BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).

    July 02, 2020 WebPage Regulatory News
    News

    EBA Guidelines on Treatment of Structural Foreign Exchange Under CRR

    EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).

    July 01, 2020 WebPage Regulatory News
    News

    FSB Issues Statement on Impact of COVID-19 Crisis on Benchmark Reform

    FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS Publishes List of Internationally Active Insurance Groups

    IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.

    July 01, 2020 WebPage Regulatory News
    News

    FED Temporarily Revises FR Y-9C With Respect to PPPLF and CARES Act

    FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).

    July 01, 2020 WebPage Regulatory News
    News

    EC Launches Consultation on Review of Solvency II Directive

    EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.

    July 01, 2020 WebPage Regulatory News
    News

    ECB Consults on Supervisory Approach to Consolidation in Banking

    ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.

    July 01, 2020 WebPage Regulatory News
    News

    PRA Letter Sets Expectations on Approach to Managing Climate Risks

    PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.

    July 01, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Amendments to Swap Margin Rule

    US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS on Package for 2020 Data Collection on ICS and Aggregation Method

    IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.

    June 30, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5425