Featured Product

    PRA Statement on LIBOR Transition and PRA Resolution-Related Rules

    July 07, 2020

    PRA published a statement that outlines its view on the implications of LIBOR transition for contracts in scope of the “Contractual Recognition of Bail-In” and “Stay in Resolution” parts of the PRA Rulebook. PRA considers that, where the sole purpose of an amendment to a liability (as defined in Contractual Recognition of Bail-In Part) or a financial arrangement (as defined in Stay in Resolution Part) is to transition away from LIBOR, the amendment should not be considered a material amendment, as the term applies to either the Contractual Recognition of Bail-In Part or the Stay in Resolution Part of the PRA Rulebook.

    The statement mentions that firms should consider adding terms of Contractual Recognition of Bail-In Part and Stay in Resolution Part into the documentation for a third-country law governed liability or financial arrangement that is amended for the sole purpose of transitioning away from LIBOR, as it enhances firm resolvability. These Parts of the PRA Rulebook are part of the UK resolution regime, ensuring that firms can fail in an orderly way. Both sets of rules are needed for the effectiveness of UK resolution actions in third-country jurisdictions. Consistent with paragraph 5.10 of the minimum requirements for own funds and eligible liabilities (MREL) Statement of Policy of BoE, firms should consider whether having non-common equity tier 1 (CET1) own funds instruments governed by third-country law but without statutory or contractual recognition of UK bail-in rules would create difficulties for resolution. 

    On December 18, 2019, PRA published a letter, from Sam Woods of PRA, on LIBOR transition. As set out in the letter, PRA has been considering the issues raised by the Working Group on Sterling Risk-Free Reference Rates, including possible implications of benchmark rate reform for rules related to resolution. Firms may particularly need to consider whether existing contracts in scope of the Contractual Recognition of Bail-In and Stay in Resolution parts of the PRA Rulebook that are changed to reflect the transition away from LIBOR could be considered materially amended and, thus, required to include terms of Contractual Recognition of Bail-In Part and Stay in Resolution Part of the PRA Rulebook.

     

    Related Links

    Keywords: Europe, UK, Banking, Securities, LIBOR, Bail-In, PRA Rulebook, MREL, Interest Rate Benchmark, Risk-Free Rates, Resolution Framework, BoE, PRA

    Related Articles
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    News

    SRB Chair Outlines Work Priorities for 2021

    The SRB Chair Elke König published an article setting out work priorities for 2021.

    January 11, 2021 WebPage Regulatory News
    News

    FDIC Selects Companies to Compete in Final Phase of Tech Sprint

    FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.

    January 11, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6417