BoE and PRA Announce Measures to Alleviate Challenges of COVID-19
BoE and PRA announced a number of supervisory and prudential policy measures to alleviate operational burdens on PRA-regulated firms and BoE-regulated financial market infrastructures (FMIs) in the wake of the COVID-19 outbreak. The announcement covers several policy areas such as the exploratory scenarios on climate change risks, bank stress tests, IFRS 9, operational risk and resilience, and implementation of certain Basel reforms.
At this time, the following actions and measures are being announced to ease the operation burdens on regulated firms:
- Cancellation of the 2020 Annual Stress Test—The decision to cancel the 2020 stress test for the eight major UK banks and building societies is intended to help lenders focus on meeting the needs of UK households and businesses via the continuing provision of credit. This is in addition to the measures published on March 11, 2020, which included a decision by the Financial Policy Committee, or FPC, to reduce the UK countercyclical buffer (CCyB) rate to 0% of banks’ exposures to UK borrowers, with immediate effect.
- Amendments to the Biennial Exploratory Scenario (BES) Timetable—BoE has postponed publication of the results of the 2019 BES on liquidity until further notice. BoE had published a discussion paper on the 2021 BES on the financial risks from climate change on December 18, 2019. BoE will take stock of the responses as well as the evolving situation with a view to announcing the way forward for this exercise in the Summer.
- Statement on IFRS 9 and COVID-19—PRA reminds firms that forward-looking information used to incorporate the impact of COVID-19 on borrowers into the expected credit loss (ECL) estimate needs to be both reasonable and supportable for the purposes of IFRS 9. Any forecasts should take into account the relief measures—such as repayment holidays—that will be made available to enable borrowers who are affected by the COVID-19 outbreak to resume regular payments. BoE continues to consider the potential interaction of COVID-19 with IFRS 9, including through discussion with relevant bodies domestically and internationally,and expects to provide further guidance to firms regarding the approach next week, with a view to assisting firms to adopt consistent approaches in the face of the prevailing uncertainty.
- Operational Resilience Policy Development—The deadline for responses to the current BoE and PRA consultations on building operational resilience and PRA consultation on outsourcing and third-party risk management will, in line with FCA, be extended to October 01, 2020.
- Internal Ratings Based (IRB) Models—Implementation of the proposals related to the Definition of Default, Probability of Default, and Loss Given Default estimation, will be delayed by one year to January 01, 2022. The move to hybrid IRB models will also be delayed until January 01, 2022. Firms using the standardized approach to credit risk will also benefit from a delay to changes they need to make as part of guidelines on definition of default.
- Financial Services Regulatory Initiatives Forum—This Forum has been established to help regulators identify and manage peaks in operational demands, on firms and financial market infrastructures, resulting from regulatory initiatives. BoE, PRA, FCA, and other authorities have now agreed that the first meeting will take place as soon as possible in April 2020 to assist co-ordination of the regulatory initiatives. Publication of the Regulatory Initiatives Grid after that meeting will ensure that industry has full sight of a coordinated future work plan as early as possible in light of Covid-19.
- Basel 3.1—PRA acknowledges that the existing Basel timetable may prove to be challenging and is coordinating internationally to ensure that implementation will happen in tandem with the other major jurisdictions. PRA will advise the government on the legislative approach accordingly.
Related Link: News Release
Keywords: Europe, UK, Banking, FMI, CCyB, Stress Testing, IFRS 9, COVID-19, Climate Change Risk, ESG, Basel III, Expected Credit Loss, Operational Risk, BoE, PRA
Featured Experts

Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

James Edwards
James leads the initiative to model the risk implications of climate change for corporates, SMEs, and sovereigns.
Previous Article
BCBS Coordinates Policy and Supervisory Response to COVID-19Related Articles
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
SEC Extends Comment Period on Climate Risk Disclosures
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.
APRA Reduces Committed Liquidity Facility, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.
CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks
The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.
PRA Issues Statement on NPEs and Policy on Trading Activity Wind-Down
The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.
EBA Updates Standards for 2023 Benchmarking of Internal Approaches
The European Banking Authority (EBA) updated the implementing technical standards that specify the data collection for the 2023 supervisory benchmarking exercise in relation to the internal approaches used in market risk, credit risk, and IFRS 9 accounting.
EIOPA Responds to Stakeholder Views on Blockchain in Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.