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
HKMA Sets Out Regulatory Treatment for Personal Loan Guarantee Scheme
HKMA has published a circular that sets out the regulatory and reporting treatment for loans that participating authorized institutions may grant to eligible borrowers under the 100% Personal Loan Guarantee Scheme.
ECB Completes Targeted Review of Internal Models of Banks
ECB published the results of the assessment of internal models that banks use to calculate risk-weighted assets for credit, market, and counterparty credit risks.
PRA on Regulatory Treatment of Loans Under Mortgage Guarantee Scheme
PRA published a statement on the regulatory treatment of retail residential mortgage loans under the Mortgage Guarantee Scheme, or MGS.
FCA Consults on Rules and Reporting Forms for Investment Firms Regime
FCA is consulting, via CP21/7, on the second phase of proposed rules to introduce the UK Investment Firm Prudential Regime (IFPR).
HMT and BoE Decide to Explore Central Bank Digital Currency in UK
HM Treasury and BoE announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential central bank digital currency in UK.
EIOPA Sets Out Expectations on Use of Climate Risk Scenarios in ORSA
EIOPA published an opinion to set out its expectations on the supervision of the integration of climate change risk scenarios by insurers in their Own Risk and Solvency Assessment (ORSA).
Bundesbank Updates AnaCredit Reporting Requirements
Bundesbank published two circulars on AnaCredit reporting requirements. Circular 27/2021 covers changes to the reporting of branches, additional attributes to be reported for investment funds from August 01, 2021, and updates to the list of international organizations.
EC Sets Out Standards for MREL Reporting by Competent Authorities
EC published the Implementing Regulation 2021/622 that lays down implementing technical standards for reporting of the minimum requirement for own funds and eligible liabilities (MREL).
BCBS to Advance Work on Suptech, Climate Risk, and Basel Monitoring
BCBS has set out the strategic work priorities, as part of its the work program for 2021-22.
PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
