PRA Proposes to Extend Temporary High Balances Coverage Amid COVID-19
PRA issued a proposal, via the consultation paper CP6/20, to extend coverage under the Financial Services Compensation Scheme (FSCS) for Temporary High Balances, from six months to twelve months from the date of deposit or from the first date the Temporary High Balance becomes legally transferable to the depositor. The proposed extension of coverage would be until, and including, January 31, 2021. This extension is being proposed in response to the impact of COVID-19 on residential property and investment markets and on access to banking services for some depositors. Temporary High Balance coverage would revert to six months from February 01, 2021. The comment period for this consultation ends on July 23, 2020.
The Temporary High Balance rules of PRA extend FSCS coverage from GBP 85,000 to GBP 1 million for six months from the point of deposit for certain qualifying life events, including the purchase and proceeds from residential properties. Depositor Protection Part of the PRA Rulebook sets out the list of categories of eligible deposits that may benefit from Temporary High Balance protection. The extension in Temporary High Balance coverage would be accompanied by consequential changes to the Depositor Protection Part of the PRA Rulebook (Appendix 1) and to paragraphs 30, 47a, and 47b of the Deposit Guarantee Scheme Statement of Policy. PRA would not require firms to update the information sheet in Annex 1 of Depositor Protection Part of the PRA Rulebook to reflect the extension to a twelve-month Temporary High Balance coverage. If firms do decide to amend their information sheets, then PRA would expect firms to ensure that the information sheet is changed back before February 01, 2021.
CP6/20 is relevant to retail financial consumers that are, or may become, Temporary High Balance depositors before February 01, 2021. CP6/20 is also relevant to the FSCS and to all PRA-authorized deposit-takers. The proposal has been designed in the context of withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to the 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 the EU take effect. PRA has assessed that the proposal would not need to be amended under the EU (Withdrawal) Act 2018.
Related Links
Comment Due Date: July 23, 2020
Keywords: Europe, UK, Banking, COVID-19, FSCS, PRA Rulebook, Deposit Guarantee Scheme, Residential Property, Credit Risk, CP6/20, Temporary High Balance Coverage, PRA
Featured Experts
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous Article
IAIS Sets Out Recommendations for Benchmark Transition for InsurersRelated Articles
HM Treasury Publishes Policy Statement Amending Benchmarks Regulation
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies Finalize Rule to Reduce Impact of Large Bank Failures
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies Finalize Rule on Net Stable Funding Ratio Requirements
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.
FSB Sets Out Effective Practices for Cyber Incident Recovery
FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.
ECB Publishes Eleventh Issue of the Macroprudential Bulletin
ECB published eleventh issue of the Macroprudential Bulletin, which provides insight into the ongoing work of ECB in the field of macro-prudential policy.
HM Treasury Seeks Views on Review of Solvency II Regime for Insurers
HM Treasury issued a call for evidence seeking views to reform the prudential regulatory regime—also known as Solvency II—of the insurance sector in UK.
ESRB Responds to EC Consultation on Review of Solvency II
ESRB responded to the EC consultation on review of Solvency II regime.
HM Treasury Consults on Phase II of Future Regulatory Framework Review
HM Treasury launched a consultation on Phase II of the Future Regulatory Framework Review, with the comment period ending on January 19, 2021.
EC Publishes Work Program for 2021
EC adopted the work program for 2021.
