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.
Keywords: Europe, UK, Banking, Securities, LIBOR, Bail-In, PRA Rulebook, MREL, Interest Rate Benchmark, Risk-Free Rates, Resolution Framework, BoE, PRA
Previous ArticlePRA Statement on Application of Matching Adjustment Amid Crisis
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.