PRA Proposes Reporting and Rulebook Changes Under CRR and Solvency II

By Regulatory News

June 07, 2019

Solvency II

PRA published an occasional consultation paper (CP13/19) that proposes minor amendments to the PRA Rulebook Parts, supervisory statements, and bank and insurer reporting templates. The proposed changes fall under the Solvency II and Capital Requirements Regulation (CRR). Among other changes, CP13/19 consults on corrections and clarifications to National Specific Templates (NSTs), internal model output templates, and associated LOG files, along with the discontinuation of the FSA006 return, which provides PRA with Value at Risk (VaR) back-testing data for banks. The consultation closes on August 07, 2019.

The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

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Effective Date: June 18, 2019

Press Release

Proposed Rule 1

Proposed Rule 2

Proposed Rule 3

Presentation on Regulatory Framework (PDF)

Presentation on Resolution Plan Rules (PDF)

The proposals in CP13/19 are included in five chapters as follows:

In Chapter 2, PRA sets out proposals to update SS3/15 on the quality of capital instruments under Solvency II to reflect changes in the Solvency II regulations that were approved by European Parliament on April 16, 2019. The draft amendments to SS3/15 are set out in Appendix 1
In Chapter 3, PRA sets out proposals to delete extraneous and historical material from SS8/14 and SS2/15 to align with the current format and bring the supervisory statements up to date. SS8/14 provides information on subordinated guarantees and the quality of capital for insurers. SS2/15 covers the topic of own funds under Solvency II. The draft amendments to SS8/14 and SS2/15 have been set out in appendices 2 and 3, respectively.
Chapter 4 sets out proposals to discontinue the FSA006 return. FSA006 return provides PRA with VaR back-testing data. PRA proposes discontinuing FSA006 and updating the Regulatory Reporting Part of the PRA Rulebook. PRA proposes deleting all references to FSA006 from SS34/15 on guidelines for completing regulatory reports. The draft instrument removing FSA006 from PRA rules and the draft amendments to SS34/15 have been set out in appendices 4 and 5, respectively. This chapter is relevant to the UK banks and UK designated investment firms with CRR Internal Model Approach permissions.
Chapter 5 sets out the PRA proposals to make minor updates, corrections, and clarifications to National Specific Templates (NSTs), NST LOG files, internal model output templates and LOG files, and related SS25/15 on regulatory reporting internal model outputs. PRA proposes to amend NSTs including NS.07 and NS.08 (template and LOG file); NS.10 and NS.11 (LOG file); and Reporting Part of the PRA Rulebook. Internal model outputs to be amended include IM.00 and IM.03 (template and LOG file). The proposed changes have been set out in appendices 6-9. This chapter is relevant to all Solvency II firms, including the Society of Lloyd’s.

During the consultation period, PRA will be issuing a Public Working Draft (PWD) of the taxonomy update to support collection of the proposed changes to NSTs, internal model output, market risk sensitivities and standard formula reporting. The PWD will include the interaction of these changes with the draft EIOPA Taxonomy 2.4 changes. PRA plans to give firms no less than three weeks to review the PWD. Pending consideration of the responses to the consultation, the proposed implementation date for Chapter 5 is November 30, 2019 whereas proposed implementation date for chapters 2-4 will be the publication date of the final policy.

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Comment Due Date: August 07, 2019

Effective Date: November 30, 2019 (Chapter 5) and Publication Date of Final Policy (Chapter 2-4)

Keywords: Europe, UK, Banking, Insurance, Reporting, PRA rulebook, CP13/19, Solvency II, CRR, National Specific Templates, FSA006, Internal Model, PRA

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PRA Proposes Reporting and Rulebook Changes Under CRR and Solvency II

By Regulatory News

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