Featured Product

    PRA Proposes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    June 21, 2021

    PRA proposed rules (in CP12/21) for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA). The proposed rules are aimed to give effect to the changes in the Capital Requirements Directive V (CRD V), as transposed, and the Capital Requirements Regulation 2 (CRR2), as onshored, which impose direct responsibility for compliance with the consolidated prudential requirements on approved or designated holding companies. The proposals would result in changes to several parts of the PRA Rulebook, in a new Statement of Policy (SoP) on supervisory measures and penalties, and in amendments to the SoP on the approach to enforcement with respect to the statutory statements of policy and procedure. The consultation closes on July 22, 2021 and the proposed implementation date for the changes resulting from this consultation is September 15, 2021.

    In CP5/21 on implementation of Basel standards, PRA had proposed to introduce new rules in each of the proposed Large Exposures, Liquidity, Liquidity Coverage Ratio, Reporting and Disclosure Parts of the PRA Rulebook, which would require parent firms and approved holding companies to meet those requirements on a consolidated basis. Those proposals seek to mirror the approach of CRR by applying the requirements on a consolidated basis to the "CRR consolidation entity," a new definition that PRA proposes to introduce into the Glossary Part of the PRA Rulebook. PRA will finalize this definition as part of the feedback to CP5/21. In the event that the proposals set out in this consultation (CP12/21) are made before the rules proposed in CP5/21, the draft PRA Rules instrument will include the definition of "CRR consolidation entities." PRA, therefore, proposes to amend the scope of the certain PRA Rulebook parts to apply the relevant consolidated requirement at the level of the "CRR consolidation entity"; these parts include Capital Buffers, Counterparty Credit Risk, Credit Risk, Definition of Capital, Groups, Interpretation Large Exposures, Liquidity Coverage Requirement—UK Designated Investment Firms, Market Risk, Notifications, Permissions, Record Keeping, Related Party Transaction Risk, Reporting Pillar 2, and Use of Skilled Persons. 

    PRA is also proposing certain ancillary amendments to the Definition of Capital, Groups, and Notifications Parts of the PRA Rulebook. These proposed amendments would ensure that, where the application of a consolidated prudential requirement also carries a secondary obligation, that obligation would rest at the appropriate level of application. PRA will also consider in due course the desirability of further consequential amendments to the relevant PRA Rulebook parts and Supervisory Statements to align consolidated prudential requirements directly to approved and designated holding companies. Additionally, under the proposed new SoP with respect to the supervisory measures and penalties for holding companies under Part 12B FSMA, PRA proposed that it would aim to intervene at an early stage to ensure that holding companies take the necessary action to address any breaches; however, it would not hesitate to use formal powers, wherever necessary, to achieve the desired supervisory outcomes. When considering whether and how to use formal powers, the facts and circumstances would be assessed on a case-by-case basis. PRA is also proposing to amend the SoP on its approach to enforcement to reflect that the SoP will apply to holding companies. 

    The proposed changes to the PRA Rulebook do not create any new prudential requirements. Instead, these changes are necessary to ensure that, where a Part of the PRA Rulebook applies on a consolidated basis, it is applied at the correct level within the banking group. The proposed rules set out the consequential amendments to the PRA Rulebook that are necessary to apply the existing consolidated prudential requirements to approved and designated holding companies. This consultation is relevant to financial holding companies, mixed financial holding companies, and banks and PRA-designated investment firms that are part of a UK consolidation group controlled by a UK parent financial holding company or UK parent mixed financial holding company.  

     

    Related Links

    Comment Due Date: July 22, 2021

    Effective Date: September 15, 2021

    Keywords: Europe, UK, Banking, Basel, CRR2, CRD5, PRA Rulebook, CP12/21, Market Risk, FSMA, Holding Companies, Regulatory Capital, Prudential Requirements, PRA

    Featured Experts
    Related Articles
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    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.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    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.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    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.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Publishes Methodological Guide to Mystery Shopping

    The European Banking Authority (EBA) published a methodological guide to mystery shopping.

    July 21, 2021 WebPage Regulatory News
    News

    APRA Issues Update on Capital Reform Policy Settings for Banks

    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.

    July 21, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Assess Continuity Planning of Market Infrastructures

    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.

    July 21, 2021 WebPage Regulatory News
    News

    BoE Announces Changes to Validation Rules for Form BTL

    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.

    July 20, 2021 WebPage Regulatory News
    News

    BCBS Proposes Changes to Process for Reviewing G-SIB Methodology

    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.

    July 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7281