PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK. SS3/21 provides an overview of how the supervisory expectations on the new and growing non-systemic UK-incorporated banks evolve, as these entities grow from the point of authorization to being regarded as fully established banks. PS8/21 also updates SS31/15 on the Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) as well as the Statement of Policy on methodologies of PRA for setting Pillar 2 capital (which contain references to SS3/21). PS8/21 took effect upon its publication on April 15, 2021.
SS3/21, which constitutes Appendix 1 of the PS8/21, provides background on the to-date progress with respect to new bank authorizations, common issues of new and growing banks, and an overview of how the supervisory approach of PRA evolves as banks grow and develop. It provides details about the supervisory expectations from new and growing banks, with a focus on common issues related to business model, governance, risk management, and controls. SS3/21 also sets out the expectations of PRA for capital management in new and growing banks and presents a revised and simplified PRA methodology for calibrating the PRA buffer for these banks. Finally, it sets out the coordinated approach of PRA and BoE to ensure that new and growing banks can exit the market in an orderly manner, followed by the supervisory approach of PRA once banks become established.
PS8/21 also provides feedback to responses to the consultation paper CP9/20, which proposed this supervisory approach for new and growing non-systemic UK banks. The proposals in CP9/20 constituted clarifications about the current supervisory approach of PRA, with the exception of proposed changes to the calculation of PRA buffer for new banks, and set out expectations for solvent wind-down plans. PRA had received 17 responses to the CP9/20. Respondents generally welcomed the proposals, but made a number of observations and clarification requests. After considering the comments, PRA revised the proposal to provide greater clarity on the PRA expectations in specific areas.
Related Links
Effective Date: April 15, 2021
Keywords: Europe, UK, Banking, Non-Systemic Banks, SREP, ICAAP, Regulatory Capital, CP9/20, Resolution Framework, Basel, Pillar 2, PRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
OCC Issues Booklet on Allowances for Credit LossesRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.