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

    FED Adopts Proposal to Implement Reporting Form for SCCL

    FED adopted a proposal to implement the Single-Counterparty Credit Limits (SCCL) reporting form (FR 2590; OMB No. 7100-NEW).

    November 20, 2019 WebPage Regulatory News
    News

    FED Proposes to Extend Initial Compliance Dates Under SCCL Rule

    FED published a proposal to extend, by 18 months, the initial compliance dates for foreign banks subject to the single-counterparty credit limit (SCCL) rule.

    November 20, 2019 WebPage Regulatory News
    News

    CBIRC to Strengthen Supervisory and Policy Support for SME Services

    CBIRC released a notification on strengthening supervision and guidance to enhance the quality and efficiency of financial services for "small and micro-enterprises" (SMEs).

    November 20, 2019 WebPage Regulatory News
    News

    APRA Publishes Approach to Regulating and Supervising GCRA Risks

    APRA published an information paper that sets out a more intensive regulatory approach to transform governance, culture, remuneration, and accountability (GCRA) practices across the prudentially regulated financial sector.

    November 19, 2019 WebPage Regulatory News
    News

    US Agencies Update Rule on Derivative Contracts Exposure Calculation

    US Agencies (FDIC, FED, and OCC) announced a final rule updating the way certain banking organizations are required to measure counterparty credit risk for derivative contracts under their regulatory capital rules.

    November 19, 2019 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Amend Treatment of HVCRE Exposures

    US Agencies (FDIC, FED, and OCC) finalized a rule to modify the treatment of high volatility commercial real estate (HVCRE) exposures, as required by the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

    November 19, 2019 WebPage Regulatory News
    News

    US Agencies Finalize Changes to Rule on Supplementary Leverage Ratio

    US Agencies (FDIC, FED, and OCC) finalized changes to the capital requirement for banking organizations predominantly engaged in custodial activities, as required by the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

    November 19, 2019 WebPage Regulatory News
    News

    IAIS Consults on Guidance on Liquidity Risk Management for Insurers

    IAIS is seeking feedback on the draft application paper on liquidity risk management for insurers.

    November 19, 2019 WebPage Regulatory News
    News

    IAIS Publishes Application Paper on Recovery Planning

    IAIS published the final application paper on recovery planning, along with the resolution of comments on the draft application paper.

    November 18, 2019 WebPage Regulatory News
    News

    FSB Publishes Summary of November Meeting of RCG for MENA Region

    FSB published a summary of the November meeting of the Regional Consultative Group (RCG) for Middle East and North Africa (MENA).

    November 17, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4174