BoE Announces Decisions from June Financial Policy Committee Meeting
BoE published the Record of the Financial Policy Committee (FPC), outlining the decisions taken since the May meeting. These decisions included setting of the UK Countercyclical Capital Buffer (CCyB) rate in the second quarter of 2020 and the postponement of certain planned initiatives in response to the ongoing disruption arising from COVID-19. In addition, FPC responded to the 2020 remit and recommendations letter from HM Treasury. The recommendations covered aspects that FPC should regard as relevant to its understanding of the financial stability objective of BoE and the responsibility of FPC in relation to the achievement of this objective.
The key decisions outlined in the Record include the following:
- FPC reaffirmed that it was important that banks should have clarity about the period of time it expected the CCyB rate to remain at 0%. It restated its previous judgment that it expected to maintain a UK CCyB rate of 0% until at least March 2021, absent any material change in the outlook. Due to the usual twelve-month implementation lag, any subsequent increase would not be expected to take effect until March 2022 at the earliest. As the outlook evolves, FPC would continue to closely monitor the credit conditions faced by UK households and businesses and stands ready to take further actions deemed appropriate to support UK financial stability.
- FPC, along with the Prudential Regulation Committee (PRC), decided to postpone any decision on an enduring approach for incorporating IFRS 9 into the capital framework. The Committees agreed that this would also allow them to reflect further feedback from stakeholders on the performance of the provisioning framework in the current stress and to work with colleagues internationally on an enduring treatment in light of it. This decision was based on decision of BCBS, in April 2020, to extend transitional measures for implementation of IFRS 9.
- FPC had agreed in December 2019 that it would return to risks from the provision of cloud services to the UK financial sector in 2020. Given how the risks had evolved since the last discussion of FPC, and to focus on dealing with the COVID-19 disruption, FPC has agreed to return to risks from the provision of cloud services in 2021. Staff would continue to monitor the migration of services to the cloud and would bring this issue back to FPC sooner if warranted by developments.
FPC also received a written update on the progress of LIBOR transition. FPC welcomed the announcement that the UK government intends to amend the existing framework for critical benchmarks in advance of the end of 2021 to give FCA enhanced powers. Additionally, the response letter to HM Treasury mentions that, while recognizing current pressures on firms and considering the responses to the December 2019 Discussion Paper on the climate biennial exploratory scenario, PRC and FPC have agreed to postpone the launch of the climate biennial exploratory scenario exercise until at least mid-2021. This delay reflects a desire to maintain the ambitious scope of the exercise, while giving firms enough time to invest sufficiently in their capabilities to allow them to deliver to a high standard. The next policy meeting of FPC will be on July 29, 2020 and the Record of that meeting will be published on August 06, 2020.
Related Links
Keywords: Europe, UK, Banking, Securities, CCyB, IFRS 9, COVID-19, Regulatory Capital, LIBOR, Interest Rate Benchmarks, FPC, Climate Change Risk, ESG, FCA, PRA, BoE
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Scott Dietz
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
Previous Article
IAIS Assesses Observance of ICPs on Corporate and Risk GovernanceRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
