Featured Product

    BoE and PRA Amend Resolution Measures to Ease Impact of Pandemic

    May 07, 2020

    BoE and PRA announced changes to the resolution measures with the aim of alleviating operational burden on regulated firms in response to the COVID-19 outbreak. The changes to resolution measures relate to the resolvability assessment framework, valuation in resolution, and resolution plan reporting. Additionally, PRA issued a statement on setting Pillar 2A requirements as a nominal amount, instead of as a percentage of total risk-weighted assets (RWAs). BoE also provided an update for firms on the minimum requirement for own funds and eligible liabilities (MREL). The 2021 MRELs will reflect the policy changes to Pillar 2A capital-setting.

    Changes to Resolution Measures

    • Resolvability Assessment Framework—The dates for the major UK banks and building societies to submit their first reports on their preparations for resolution and publicly disclose a summary of these reports have been extended by a year. These firms will now be required to submit their first reports to PRA by October 2021 and make public disclosures by June 2022. BoE will also make its first public statement on these firms’ resolvability by June 2022. In due course, PRA intends to consult on changes to the Resolution Assessment Rules.
    • Valuation in Resolution—The compliance deadline for the Statement of Policy on valuation capabilities to support resolvability has been extended by three months, to April 01, 2021. The deadline for firms to implement other Statements of Policy relevant to resolvability remains January 01, 2022.
    • Resolution Plan Reporting—Firms will not be required to submit certain resolution pack information under the PRA supervisory statement (SS19/13) on resolution planning until the end of 2022, unless notified otherwise on an individual basis by PRA. This is an extension to the existing delay to resolution pack submissions that had been due to expire at the end of 2020 and now applies to a wider range of firms. 

    Statement on Conversion of Pillar 2A Capital Requirements

    PRA is alleviating unwarranted pressure on firms by setting all Pillar 2A requirements as a nominal amount, instead of a percentage of total RWAs. Consistent with the BoE approach to stress testing, PRA does not believe that RWAs are a good approximation for the evolution of risks captured in Pillar 2A in a stress. PRA will continue to regularly assess the appropriate level of Pillar 2A; given these regular assessments, PRA believes the most proportionate approach is to set Pillar 2A as a nominal amount between assessments. This would reduce Pillar 2A as well as the threshold at which firms are subject to maximum distributable amount (MDA) restrictions, as a share of a firm’s RWAs in the capital stack if RWAs increase. 

    PRA will set Pillar 2A as a nominal amount in the 2020 and 2021 Supervisory Review and Evaluation Processes (SREPs). Firms with an SREP in 2020 do not need to apply for a variation to their Pillar 2A requirements. PRA invites all firms who do not have an SREP assessment due in 2020 to apply for a conversion of their current Pillar 2A requirement into a nominal amount using RWAs as of end-December 2019. This change is voluntary, subject to supervisory agreement, and would apply until the firm’s next regularly scheduled SREP. Where the PRA judges that RWAs are a more accurate reflection of a firm’s risks between assessments, it may reject the application.

    Update on MREL

    BoE will continue to keep MRELs under review and monitor market developments carefully in the third quarter of this year to inform its approach in the fourth quarter of 2020 to setting January 2021 MRELs and indicative January 2022 MRELs. In addition, BoE clarified that it intends to exercise its discretion with respect to the transition time firms are given to meet higher MRELs. Firms not currently subject to a leverage-based capital requirement, but which subsequently become subject to one, will be given at least 36 months after that requirement takes effect to meet the higher MREL resulting from it.

     

    Related Links

    Keywords: Europe, UK, Banking, COVID-19, Resolution Planning, Reporting, Resolution Plan, Pillar 2A, Capital Requirements, Risk-Weighted Assets, Resolvability Assessment Framework, MREL, SREP, Deadline Extension, BoE, PRA

    Featured Experts
    Related Articles
    News

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    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.

    July 29, 2021 WebPage Regulatory News
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    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).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    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.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    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.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    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.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    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.

    July 26, 2021 WebPage Regulatory News
    News

    ECB Study Assesses Impact of Basel III Finalization Package

    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.

    July 26, 2021 WebPage Regulatory News
    News

    ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading

    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.

    July 26, 2021 WebPage Regulatory News
    News

    PRA Updates Remuneration Policy Statement Templates and Tables

    The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.

    July 26, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7307