Featured Product

    PRA Consults on Groups Policy and Double Leverage for Banks

    October 04, 2017

    The PRA published a consultation paper CP19/17 on groups policy and double leverage for banks. The PRA has reviewed the groups policy framework, to ensure that it remains coherent and fit-for-purpose in light of the post-crisis financial reforms—including Basel III standards, UK ring-fencing legislation, the resolution framework, and other international developments. Following the review, the PRA is considering certain necessary changes to achieve its objective. The consultation closes on January 04, 2018.

    This consultation paper makes proposals that require assessment and mitigation of the risks to group resilience due to the use of “double leverage.” Double leverage occurs when one or more parent entities in a group funds some of the capital in its subsidiaries by raising debt or lower forms of capital externally (Chapter 2). The proposals also require assessment and mitigation of the risks highlighted by prudential requirements applied by local regulatory authorities on overseas subsidiaries of UK consolidation groups (Chapter 2), along with improved monitoring of the distribution of financial resources across different group entities (Chapter 3). The PRA is also consulting elsewhere on a number of other policy proposals that refine the PRA’s framework for Groups Policy (summarized in Chapter 4). To implement these proposals, the PRA proposes to update:

    • Supervisory Statement SS31/15 “The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)”
    • Statement of Policy “The PRA’s methodologies for setting Pillar 2 capital”
    • SS24/15 “The PRA’s approach to supervising funding and liquidity risk”
    • Internal Capital Adequacy Assessment Part of the PRA Rulebook

    CP19/17 is relevant to PRA-authorized UK banks, building societies, PRA-designated UK investment firms, and their qualifying parent undertakings, as well as credit institutions, investment firms, and financial institutions that are subsidiaries of these firms, regardless of their location. Once the proposals are finalized, the policy will be implemented fully from January 01, 2019. Where practical and applicable, firms should aim to incorporate the consultation proposals in their 2018 ICAAP/Individual Liquidity Adequacy Assessment Process (ILAAP) submissions ahead of full implementation. The PRA will keep its proposed approach and policy under review to assess whether any adjustments are required. The PRA will monitor the quality of information provided by firms in their ICAAPs/ILAAPs to ensure it is sufficient to meet the expectations set out in these proposals.


    Related Link: CP19/17 on Groups Policy and Double Leverage (PDF)

    Comment Due Date: January 04, 2018

    Effective Date: January 01, 2019

    Keywords: Europe, UK, Banking, Groups Policy, Double Leverage, CP19/17, ICAAP, ILAAP, SREP, PRA

    Related Articles
    News

    HKMA on Fintech Adoption and Innovation by Banks in Hong Kong

    HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.

    May 20, 2020 WebPage Regulatory News
    News

    BIS on Impact of Increasing Use of Cloud Technology on Cyber Risk

    BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.

    May 20, 2020 WebPage Regulatory News
    News

    ECB Consults on Guide for Managing Climate and Environmental Risks

    ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.

    May 20, 2020 WebPage Regulatory News
    News

    ECB Issues Opinion on Revisions to CRR in Response to COVID Crisis

    ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.

    May 20, 2020 WebPage Regulatory News
    News

    EBA Assesses Interlinkages Between Recovery and Resolution Planning

    EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).

    May 20, 2020 WebPage Regulatory News
    News

    SRB Publishes Final MREL Policy Under the Banking Package

    SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.

    May 20, 2020 WebPage Regulatory News
    News

    US Agencies Amend Interim Final Rule on Transition Period for CECL

    US Agencies (FDIC, FED, and OCC) published a final rule that makes technical changes to the March 31, 2020 interim final rule that provides a five-year transition period for the impact of the current expected credit loss (CECL) methodology on regulatory capital.

    May 19, 2020 WebPage Regulatory News
    News

    ECB Releases Results of March Survey on Credit Terms and Conditions

    ECB published results of the March 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets.

    May 19, 2020 WebPage Regulatory News
    News

    FINMA Adjusts Deadlines for COVID-19 Relief Measures for Banks

    FINMA published guidance (06/2020) on extending or discontinuing various exemptions that were granted due to the COVID-19 crisis.

    May 19, 2020 WebPage Regulatory News
    News

    SRB Consults on Standardized Data Set for Bank Valuation in Resolution

    SRB launched a consultation on the minimum data needed for valuation of a bank in resolution.

    May 19, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5203