PRA published a letter from Mel Beaman, the Director for UK Deposit Takers, to suspend the relevant guidance levels on fixed rate lending limits in the “Specialist Sourcebook” for an initial period of six months, running from August 01, 2020 to January 31, 2021. The letter has been issued, to chief executive officers of non-systemic building societies, in response to a suggestion from the Building Societies Association proposing a six-month suspension of the relevant guidance levels on fixed rate lending limits in the “Specialist Sourcebook.”
The Sourcebook is guidance, not rules, and intended specifically to achieve alignment between risk appetite and risk capability. It is also open to any Society to apply for an extension to any of the guidelines and many of these have been agreed without undue process, including a number of extensions to fixed rate lending risk appetites. Nevertheless, PRA acknowledged the desire of some Societies to be able to react more quickly in the current environment and agree to suspend the relevant guidance levels on fixed rate lending limits in the Sourcebook for an initial period of six months. The only proviso is to limit any self-administered extension to 10% above the lower of the Sourcebook benchmark or the Society’s current limit, and still expect boards to undertake the appropriate risk assessment (as detailed in supervisory statement 20/15) before undertaking any such change. PRA also wants to be informed of any changes the Societies make in this respect, together with sight of the relevant board minutes. PRA will review this COVID-19 related dispensation prior to January 31, 2021.
Keywords: Europe, UK, Banking, COVID-19, Fixed Rate Lending Limits, Specialist Sourcebook, Building Societies, PRA
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