PRA Finalizes Approach to Supervising Liquidity and Funding Risks
PRA published the policy statement PS4/20 that contains the updated supervisory statement (SS24/15) on its approach to supervising liquidity and funding risks (Appendix 1). PS4/20 provides feedback to responses to the consultation paper CP27/19, which contained proposals to update the SS24/15. The policy statement is relevant to PRA-authorized UK banks, building societies, and PRA-designated UK investment firms. The PS4/20 comes into effect on its date of publication.
In October 2019, BoE published the Market Operations Guide of BoE, outlining the framework for operations in sterling money markets. To reflect the Market Operations Guide and reiterate the relevant expectations set out in SS9/17 on recovery planning, PRA consulted on changes to SS24/15. The consultation closed on November 17, 2019. PRA received three responses to the CP27/19. Respondents generally welcomed the PRA proposals, while requesting some clarifications and suggesting limited changes to the proposals. The details of these responses, along the feedback and final decisions of PRA, have been set out in Chapter 2 of the policy statement.
In CP27/19, PRA had proposed that:
- There should be no presumptive order in which firms should use the BoE liquidity facilities, including the Discount Window Facility (DWF), or draw down their own liquid asset buffers to meet a liquidity need. Firms would be expected to use their own judgement in applying for and using the liquidity facilities of BoE.
- The PRA expectations from firms that have been set out in SS9/17 also apply with regard to the use of the central bank facilities as outlined in SS24/15. The proposals reiterated that recovery options should be credible, including where these involve the use of central bank facilities.
The policy set out in PS4/20 has been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time the UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with the EU take effect. PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018.
Related Links
Effective Date: March 02, 2020
Keywords: Europe, UK, Banking, Securities, Liquidity Risk, Market Operations Guide, Recovery Planning, CP27/19, SS24/15, PS4/20, BoE, PRA
Featured Experts
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Related Articles
BIS Paper Studies Impact of Fintech Lending on Small Businesses in US
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
EBA Launches EU-Wide Transparency Exercise in 2022
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
EC Rule Lists Advanced Economies for Market Risk Capital Calculations
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
