The Prudential Regulation Authority (PRA) published the policy statement PS17/21 that is focused on implementation of the remaining Basel III standards in UK. PS17/21 provides feedback to responses to the consultation paper CP5/21 and contains near-final rule instruments, Statements of Policy (SoPs), supervisory statements, and reporting templates and instructions. PRA expects to publish the final rule instruments in a subsequent policy statement, after Her Majesty's (HM) Treasury has laid the Statutory Instrument, to delete the relevant parts of the Capital Requirements Regulation (CRR) that these near-final rules will replace. This policy is intended to take effect at the same time as HM Treasury’s revocation of the relevant parts of the CRR, which will be on January 01, 2022. This policy statement is relevant to UK banks, building societies, and PRA-designated investment firms as well as the UK financial holding companies and UK mixed financial holding companies of certain PRA-authorized firms.
The appendices to this policy statement contain near-final policy material with respect to the following:
- CRR Rules Instrument 2021
- CRR Firms: (CRR 2 Revocations and Other Amendments) Instrument 2021
- SS15/13 titled “Groups,” SS12/13 titled “Counterparty credit risk,” SS16/13 titled “Large Exposures,” SS24/15 titled “The PRA”s approach to supervising liquidity and funding risks,” SS34/15 titled “Guidelines for completing regulatory reports,” SS2/19 titled “PRA approach to interpreting reporting and disclosure requirements and regulatory transactions forms after the UK”s withdrawal from the EU,” and SS6/17 titled “Compliance with the EBA”s Guidelines on disclosure.”
- The SoP titled “The PRA”s methodologies for setting Pillar 2 capital,” SoP titled “Liquidity and funding permissions,” and SoP titled “Interpretation of EU Guidelines and Recommendations: Bank of England and PRA approach after the UK”s withdrawal from the EU”
- Updated reporting data items and instructions including PRA101–PRA108; RFB001, RFB003, and RFB004; and Annex I–XXIX of UK COREP and FINREP data items and instructions
- Updated UK Pillar 3 disclosure data items and instructions
- Detailed analysis of objectives, summary of the purpose of the rules, corresponding provisions, and restatement provisions (in Appendices 12 to 15, respectively)
PRA had proposed, via CP5/21 in February 2021, new requirements to implement some of the remaining Basel III standards in the UK. PRA had also proposed to make rules that restate elements of the CRR and related on-shored EU level 2 regulations made under the CRR (CRR Level 2 Regulations) that are being revoked by the HM Treasury. In response to the feedback received on CP5/21, PRA has:
- Changed a number of Required Stable Funding factors under net stable funding ratio (NSFR), including those applicable to certain centrally cleared derivatives transactions
- Postponed the application of the mandatory substitution approach to large exposures that are secured by collateral issued to a third party, pending further consultation and impact assessment
- Decided to consider, on a case-by-case basis, applications from firms to increase their non-core large exposures group limits to offset the impact of applying Standardized approach for counterparty credit risk instead of the internal model method
- Introduced a notification requirement that applies if firms’ exposures to collective investment undertakings are material
- Assessed that further consideration is needed of the conditions under which a domestic liquidity subgroup may be granted
- Not implemented new reporting templates for the Fundamental Review of the Trading Book Alternative Standardized Approach in light of changes to HM Treasury’s approach to Basel III implementation
- Made consequential changes to update the Statement of Policy titled "Interpretation of EU Guidelines and Recommendations: BoE and PRA approach after the UK’s withdrawal from the EU." This reflects the discontinued relevance of EBA Guidelines on disclosure requirements under Part Eight of CRR and EBA guidelines on LCR disclosure, once the Disclosure Part of the PRA Rulebook comes into effect
PRA also decided to implement the proposed standardized approach to counterparty credit risk (SA-CCR) framework as set out in the CP5/21 and will undertake a holistic review of SA-CCR and other elements of the counterparty credit risk framework as part of the implementation of Basel 3.1 standards. The near-final policy material broadly corresponds to the set of issues covered by the EU's Capital Requirements Regulation 2 (EU CRR2), which implements the same set of remaining Basel III standards. PRA does not intend to change the near-final policy material in PS17/21 or make significant alterations to the text of the instruments before the making of the final policy material. PRA expects to publish the final rule instruments in a subsequent policy statement, after HM Treasury has laid the Statutory Instrument to delete the relevant parts of the CRR that these near-final rules will replace.
Effective Date: January 01, 2022
Keywords: Europe, UK, Banking, Basel, CRR, CP5/21, PS17/21, SA-CCR, NSFR, LCR, Regulatory Capital, Liquidity Risk, Operational Risk, Disclosures, Reporting, Market Risk, PRA, HM Treasury
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
The European Banking Authority (EBA) published a methodological guide to mystery shopping.
The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.
The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.
The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.