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

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.

    May 12, 2022 WebPage Regulatory News
    News

    EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA

    The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.

    May 11, 2022 WebPage Regulatory News
    News

    EC Mandates ESAs to Propose Amendments to SFDR Technical Standards

    The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.

    May 11, 2022 WebPage Regulatory News
    News

    EBA Examines Supervisory Practices, Issues Deposits Reporting Template

    The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),

    May 11, 2022 WebPage Regulatory News
    News

    SNB Updates NSFR Forms and FINMA Consults on Operational Risk Circular

    The Swiss National Bank (SNB) published Version 1.2 of the reporting forms (NSFR_G and NSFR_P) on the net stable funding ratio (NSFR) of banks, along with the associated documentation.

    May 10, 2022 WebPage Regulatory News
    News

    US Agency Publications Address Basel, Reporting, and CECL Developments

    The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances

    May 09, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8191