Featured Product

    PRA Statement on Changes to CRR in Response to COVID-19 Crisis

    June 30, 2020

    PRA published a statement that sets out its views on certain amendments made to Capital Requirements Regulations (CRR and CRR2) via EU Regulation 2020/873 (CRR "Quick Fix"), including some guidance for firms. The CRR "Quick Fix" which was published in response to COVID-19 pandemic is applicable since June 27, 2020. In accordance with the European Union (Withdrawal Agreement) Act, the CRR "Quick Fix" applies directly to PRA-regulated firms. This PRA statement sets out its initial views on the measures included in the "Quick Fix" package. These measures include transitional arrangement for capital impact of IFRS 9 Expected Credit Loss (ECL) accounting, acceleration of certain CRR2 measures, and a temporary prudential filter on certain unrealized gains and losses.

    Transitional arrangements for capital impact of IFRS 9 ECL accounting

    The CRR "Quick Fix" introduces new transitional arrangements for the capital impact of IFRS 9 ECL provisions. It implements the measures announced by BCBS in April 2020, with respect to the ECL accounting to alleviate the impact of COVID-19. The intention of PRA remains that, subject to the need for sufficient resilience at the end of the transitional period, all aspects of supervision of a firm using the transitional arrangements would be carried out using transitional data on capital resources and not "fully loaded" figures. In particular, as stress tests should reflect how stress would be experienced, those tests should fully take account of the revised transitional arrangements.

    Firms already applying the CRR transitional arrangements for IFRS 9 will need to implement the revised calculations set out in the CRR "Quick Fix," including amending the common equity tier 1 (CET1) add-back factors applied to relevant ECL provisions for 2020-24. Firms applying the transitional arrangements that are considering ceasing to apply them should note that, under the CRR, doing so would require the permission of PRA. If a firm wishes to apply for PRA permission no longer to apply the transitional arrangements, the firm is encouraged to contact its PRA supervisor with a request by July 31, 2020. The firm needs to include a written explanation of the basis on which its management body has satisfied itself of the continuing adequacy of the firm’s financial resources, including in stressed scenarios. Its supervisor will discuss the matter with it in the context of supervision of the firm’s resilience and capital adequacy.

    Acceleration of Certain CRR2 measures and temporary prudential filter on certain unrealized gains and losses

    The CRR "Quick Fix" accelerates the date of application of certain CRR2 measures that had been due to apply from June 28, 2021. These include the revised small and medium-size enterprises (SME) support factor, infrastructure support factor, and non-deduction of certain software assets from CET1 capital. The CRR "Quick Fix" also applies the revised treatment of software assets from the date on which EBA regulatory standards that will specify their prudential treatment enter into force. The CRR "Quick Fix" also includes a temporary discretion for firms until December 31, 2022 to remove a proportion of unrealized gains and losses on exposures to certain public sector authorities. These measures do not derive from BCBS agreements and are specific to the CRR. At present, PRA does not have adequate information on the quantitative impact of these measures. PRA intends to request data to facilitate quantitative analysis of the impact of these CRR "Quick Fix" measures. Analysis of those data, along with the final regulatory technical standards of EBA on software assets, will inform the PRA supervisory approach, including an assessment of whether further action is necessary under Pillar 2.

     

    Related Links

    Keywords: Europe, UK, Banking, COVID-19, Basel, CRR, CRR2, IFRS 9, ECL, CET 1, Pillar 2, Withdrawal Agreement, Transitional Arrangements, PRA

    Featured Experts
    Related Articles
    News

    APRA Consults on Reporting Standard for Credit Risk Management

    APRA is consulting on the reporting standard for credit risk management (ARS 220.0).

    October 28, 2020 WebPage Regulatory News
    News

    Regulators Fine Goldman Sachs for Risk Management Failures

    FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).

    October 23, 2020 WebPage Regulatory News
    News

    ISDA Launches IBOR Fallbacks Supplement and Protocol

    ISDA launched the IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol, with both becoming effective on January 25, 2021.

    October 23, 2020 WebPage Regulatory News
    News

    Canada Hosts International Conference of Banking Supervisors

    BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.

    October 22, 2020 WebPage Regulatory News
    News

    FCA Proposes More Measures to Help Insurance Customers Amid Crisis

    FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.

    October 21, 2020 WebPage Regulatory News
    News

    EBA Issues Opinion to Address Risk Stemming from Legacy Instruments

    EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.

    October 21, 2020 WebPage Regulatory News
    News

    ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020

    ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).

    October 21, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    APRA Initiates Action Against a Bank for Liquidity Compliance Breach

    APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.

    October 21, 2020 WebPage Regulatory News
    News

    European Council Adopts Position on Capital Markets Recovery Package

    Ambassadors of EU member states agreed on the mandate of European Council on the Capital Markets Recovery Package, to support economic recovery from the COVID-19 crisis.

    October 21, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6011