Featured Product

    PRA Review Finds Most Banks Compliant with Regulatory Reporting Rules

    April 30, 2021

    PRA published a letter that sets out findings from the 2020 Internal Audit Review of the Collections function of a sample of non-systemic banks and building societies. The review of the Collections function aimed to provide assurance, to the Boards of these firms and to PRA, about the effectiveness of controls in the areas of collection processes and control environment, governance and oversight, and regulatory reporting. This letter to the Chief Risk Officers of these regulated firms notes that the processes and controls in place for collections operations, from a prudential perspective, are largely adequate and effective across the majority of the firms. Nevertheless, the review identified some improvement areas, resulting in recommendations for these firms.

    The PRA letter summarizes the findings of the review while Annex 1 pf the letter sets out more details on specific areas of interest. The observations reinforce the need for some firms to continue to enhance their collections operations and develop the right level of control and governance to ensure effectiveness, review the adequacy of resources, to efficiently manage the processes, and to ensure adequate oversight at the Board level. In terms of the assessment of processes and controls in place to support Collections functions, 63% of the recommendations relate to weakness in the policy/process documentation and 20% relate to ensuring alignment to regulatory reporting requirements in terms of definitions and rules (that is, FINREP, EBA Non Performing Exposure, Unlikely to pay (UTP), default. In terms of the effectiveness of controls of end-to-end Collections operation, 12% recommendations relate to poor forecast or forward-looking analysis of expected default exposures to predict impact on Collections resources, 11% relate to the remediation of system issues or system migration or lack of validation control checks, 10% relate to weak data control processes for regulatory reporting, and only 3% relate to improvement of IFRS 9 analysis to include the impact of forbearance and arrears (particularly where the ECL model is based on limited collection and forbearance experience).

    Overall, the review showed that the majority of firms were compliant with the regulatory reporting requirements with a few exceptions, mostly on forbearance. Minor inconsistencies were identified between what is disclosed in the Internal Capital Adequacy Assessment Process (ICAAP) and in the regulatory reporting. The submission of complete, timely, and accurate regulatory returns continues to be the foundation of effective supervision; therefore, PRA expects all firms to continue to take action, as necessary, to ensure the integrity of regulatory returns. For this exercise, PRA had selected 42 non-systemic banks and building societies as participants. The firms in scope represented 42% of non-systemic firms’ lending exposures, with 70% of the firms being banks. Fifty-four percent of the firms in scope had a lending book of less than GBP 2 billion, of which 30% was less than GBP 0.5 billion. PRA will continue to monitor firms’ Collections functions in light of the COVID-19 pandemic impact on arrears and forbearance levels.


    Related Link: Letter on Review Findings


    Keywords: Europe, UK, Banking, Reporting, Governance, ICAAP, IFRS 9, Credit Risk, Basel, Internal Controls, Compliance Risk, PRA

    Featured Experts
    Related Articles

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8699