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.
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
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.