The PRA published a consultation paper (CP12/17) that sets out proposed adjustments to its Pillar 2 capital framework. CP12/17 proposes to change supervisory statement (SS31/15) titled “The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)” and Statement of Policy, titled, “The PRA’s methodologies for setting Pillar 2 capital.”
The PRA proposed to set Pillar 2A capital as a firm-specific capital requirement under section 55M of the Financial Services and Markets Act 2000, rather than as individual guidance. Under this proposal, to meet the overall financial adequacy rule and to be consistent with the PRA’s current policy, the requirement would be set at the level and quality of capital that the PRA considers a firm should maintain, in addition to Pillar 1. In implementing these proposals, the PRA intends to update some of the existing capital terminology such as “Total Capital Requirements or TCR.” This term is introduced to refer to the amount and quality of capital a firm must maintain to comply with the Capital Requirements Regulation (575/2013) (CRR) (Pillar 1) and the Pillar 2A capital requirement. The term “Individual Capital Guidance” will be discontinued.
The PRA also proposed a revised disclosure policy expecting firms to disclose their TCR or, where a Pillar 2A capital requirement has not yet been set, total Pillar 1 and Pillar 2A guidance. PRA proposed to provide clarity on when and how individual Pillar 2 capital requirements may be set. CP12/17 is relevant to all banks, building societies, and PRA-designated investment firms. The proposals aim to bring greater clarity, consistency, and transparency to the PRA’s capital-setting approach.
Related Link: CP12/17 (PDF)
Comment Due Date: October 12, 2017
Keywords: Europe, United Kingdom, PRA, Pillar 2A, Banking, CRR, Capital Requirements, Diclosures
Previous ArticleAPRA Consults on Superannuation Operational Governance Proposals
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).
As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).
ECB published results of the financial stability review in May 2020. Among other issues, the financial stability review assesses operations of the financial system so far during the COVID-19 pandemic.
Financial policymakers and international standard-setters met virtually with private-sector executives to discuss international policy responses to COVID-19 pandemic.
ESMA published a letter responding to IASB on the exposure draft on the phase 2 of the interest rate benchmark reform.
HKMA is consulting on revisions to the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
EBA published thematic note presenting a preliminary assessment of the impact of COVID-19 outbreak on the banking sector in EU.