PRA published the consultation paper CP3/20, which sets out its proposals to make minor amendments to the PRA rules and supervisory statements, the National Specific Templates (NSTs) and associated LOG files, and the market risk sensitivities data item and associated instructions. The proposed changes fall under the Solvency II and Capital Requirements Regulation (CRR). Among other changes, CP3/20 consults on proposals to rectify errors identified within versions of PRA101 and Capital+ and to remove incorrect validations from Part 3 of the Branch Return Form template. The consultation closes on June 26, 2020.
The proposals in CP3/20 are included in the following chapters:
- In Chapter 2, PRA sets out proposals to remove redundant material, move certain expectations, align expectations with existing policy material, and make its expectations clearer. These proposals would be made effective through updates to SS24/15 on the PRA approach to supervising liquidity and funding risks (Appendix 1) and the instructions for completing PRA110 (Appendix 2).
- In Chapter 3, PRA sets out a proposal to replace a reference to LIBOR with Sterling Overnight Index Average (SONIA) as the risk-free rate benchmark. The proposal would be made effective through an update to Rule 18.4(2) under the Insurance Company—Mathematical Reserves Part of the PRA Rulebook (Appendix 3).
- Chapter 4 sets out the proposals to make minor updates, corrections, and clarifications to National Specific Templates (NSTs) and associated LOG files, along with the Market Risk Sensitivities (MRS) template and associated instructions. This chapter includes amendments to NSTs NS.00, NS.07, and NS.10 (template and LOG file) as well as NST NS.09 (LOG file). These templates will be made effective through an update to the Reporting Part of the PRA Rulebook and SS7/17 on data collection of market risk sensitivities under Solvency II.
- In Chapter 5, PRA sets out proposals to make minor administrative changes and corrections to several Senior Managers & Certification Regime (SM&CR) forms (Appendices 12 and 13) to ensure that the forms are accurate and aligned with changes proposed by FCA. These changes do not alter the information required by the forms. The forms would be made effective through an update to the Senior Managers Regime Part of the PRA Rulebook (Appendix 11).
- In Chapter 6, PRA sets out proposals to remove incorrect validations from Part 3 of the Branch Return Form template (Appendices 15 and 16). This change would be made effective through an update to the Regulatory Reporting Part of the PRA Rulebook (Appendix 18) and Appendix 13 of SS34/15 on guidelines for completing regulatory reports (Appendix 17).
- Chapter 7 sets out proposals to rectify errors identified within versions of PRA101 and Capital+ (Appendix 19). This change would be made effective through an update to the Regulatory Reporting Part of the PRA Rulebook (Appendix 18) and, in addition, minor presentational changes to SS34/15 (Appendix 20) to harmonize and remove references to historic templates. This chapter is relevant to CRR firms.
- Chapter 8 sets out a proposal to clarify that non-sequential amortization features constitute complex features in Significant Risk Transfer (SRT) transactions. This clarification would be made through an amendment to paragraph 2.8 of SS9/13 on Significant Risk Transfer under securitization (Appendix 21). This chapter is relevant to CRR firms.
Pending consideration of the responses to this consultation, the proposed implementation dates are the dates of publication of the final policy. The proposals set out in CP3/20 have been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to the European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the regulatory framework in UK at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018.
Comment Due Date: June 26, 2020
Effective Date: Publication Date of Final Policy
Keywords: Europe, UK, Banking, Insurance, Securities, PRA Rulebook, Solvency II, CRR, National Specific Templates, Securitization, SONIA, Branch Return Form, Market Risk, SM&CR, PRA 110, PRA 101, Capital+, CP3/20, Credit Risk, LIBOR, Liquidity Risk, PRA
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