PRA is proposing (CP5/19) to update the Pillar 2 capital framework to reflect continued refinements and developments in setting the PRA buffer (Pillar 2B). The proposals cover hurdle rate in stress, buffer interactions and usability, the risk management and governance assessment, updating benchmarks to assess Pillar 2A credit risk, and corrections to certain minor drafting errors. Comment period on the consultation ends on June 13, 2019 and PRA proposes to implement the amendments by October 01, 2019.
To implement the changes in the consultation, PRA proposes to update the following:
- Statement of Policy on PRA’s methodologies for setting Pillar 2 capital (Appendix 1)
- Supervisory statement (SS31/15) on Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) (Appendix 2)
- SS6/14 on implementing the Capital Requirements Directive (CRD IV) provisions on capital buffers. (Appendix 3)
CP5/19 is relevant to PRA-authorized banks, building societies, and PRA-designated investment firms. The purpose of these proposals is to bring greater clarity, consistency, and transparency to the capital-setting approach of PRA. In promoting a greater level of transparency, PRA seeks to promote financial stability, the safety and soundness of PRA-authorized firms, and facilitate more informed and effective capital planning for banks.
Comment Due Date: June 13, 2019
Keywords: Europe, UK, Banking, Basel III, Pillar 2, Capital Framework, Credit Risk, CRD IV, Pillar 2B, CP5/19, SS31/15, SS6/14, ICAAP, SREP, PRA
Previous ArticleFED Updates Supplemental Information and Q&A for Form FR Y-14
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.