PRA Decides to Maintain Systemic Risk Buffer Rates Until Next Review
PRA decided to maintain the Systemic Risk Buffers of firms at the rate set in December 2019 for a further year until December 2022, with no rate changes taking effect until January 2024. This decision has been taken, with the support of the Financial Policy Committee (FPC), in response to the economic shock from COVID-19 pandemic. As part of the implementation of the revised Capital Requirements Directive (CRD5), the CRD IV Systemic Risk Buffer will be replaced by the Other Systemically Important Institutions (O-SII) buffer on December 29, 2020. The O-SII buffer will be set at the same rate as the current Systemic Risk Buffer of firms.
PRA is acting now to offer lenders more certainty over their future capital requirements. This decision is relevant only to ring-fenced bodies and large building societies that will be subject to the O-SII buffer. PRA will now reassess O-SII rates of firms in December 2022, based on balance sheet positions at the end of 2021. Scheduling the next reassessment of O-SII buffer requirements for December 2022 at the earliest will aid firms in their capital planning by taking pressure off end-2020 balance sheets (on which the December 2021 reassessment would have been based). Any decision taken in December 2022 on O-SII rates would take effect from January 2024 in line with its policy. PRA also reiterated its expectation that all elements of capital and liquidity buffers of banks can be drawn down as necessary to support economy through this shock. This is in line with the PRA commitment, in April 2020, to consider the growth of balance sheets of firms in context of the pandemic and the extent to which the balance sheets are temporarily inflated.
Related Links
Keywords: Europe, UK, Banking, Systemic Risk Buffer, Systemic Risk, O-SII, CRD5, COVID-19, Regulatory Capital, Basel, 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
FED Consults on Criteria to Include Foreign Banks in LISCC ProgramRelated Articles
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
