PRA Finalizes Policy on Simplified Obligations for Recovery Planning
PRA published the policy statement PS25/20 on simplified obligations for recovery planning, in the form of the updated supervisory statement SS9/17 on recovery planning (Appendix 1). PS25/20 also provides feedback to responses to the consultation paper CP10/20, which proposed to allow certain firms to benefit from simplified obligations for recovery planning. After considering responses to the consultation, PRA has made additional changes to the draft amendments to SS9/17. The final policy will take effect immediately.
Under Article 4 of the Bank Recovery and Resolution Directive (BRRD), PRA has discretion to apply simplified obligations for recovery planning for firms, where their failure is not expected to have a significant negative effect on financial markets, on other institutions, on funding conditions, or on the wider economy, taking account of the other criteria set out in Article 4(1). Simplified obligations enable PRA and BoE, to decide on the level of detail required in recovery and resolution planning of firms. The proposals in CP10/20 related to how PRA would perform the eligibility assessment process to determine which firms are eligible for simplified obligations in respect of recovery planning. PRA received two responses to CP10/20. The responses were supportive of the proposal to introduce simplified obligations.
PRA has considered the responses and has made additional changes to SS9/17. The additional changes include addition of details to explain how the recovery planning expectations of PRA vary according to the size of firms as well as to explain that eligible firms are permitted to include a minimum of only two scenarios in their recovery plans. PRA expects firms to include a combined capital and liquidity stress, as these scenarios are the most challenging. PRA considers that the changes to the SS9/17 are not significant and will not materially alter the cost-benefit analysis presented in CP10/20.
PS25/20 is relevant to authorized UK banks, building societies, designated UK investment firms, and their qualifying parent undertakings, to which the Recovery Plans Part of the PRA Rulebook applies. The policy is likely to be of interest to smaller and non-systemic firms that do not perform critical functions. The policy set out in PS25/20 has been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with the European Union take effect. PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018.
Related Links
Effective Date: December 07, 2020
Keywords: Europe, UK, Banking, Recovery Planning, Basel, BRRD, CP 10/20, PS25/20, SS9/17, Resolution Framework, 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
PRA Decides to Maintain Systemic Risk Buffer Rates Until Next ReviewRelated 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
