Featured Product

    PRA Issues Policy on Implementation of Certain Provisions of CRD5

    December 09, 2020

    PRA published the policy statement (PS26/20) that contains near-final Rules instruments, statements of policy, supervisory statements, and templates in relation to implementing certain elements of the Capital Requirements Directive (CRD5). PS26/20 also provides feedback to responses to the consultation papers (CP12/20 and CP17/20) that proposed changes to implement these elements of CRD5. Among other changes, PRA is updating the statement of policy on methodologies for setting Pillar 2 capital, the supervisory statement (SS31/15) on Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP), and the supervisory statement (SS34/15) on guidelines for completing regulatory reports. PS26/20 includes near-final Rules Instruments including those related to capital buffers, credit risk, interest rate risk, Pillar 2 reporting, branch reporting, and remuneration.

    PS26/20 includes updates to the following:

    • Data item and instructions of FSA079 on Pillar 2 concentration risk additional data requirements
    • SS2/17 on remuneration, SS28/15 on strengthening accountability in banking, SS4/16 on internal governance of third country branches, and SS1/17 on approach to branch supervision
    • Statements of policy on approach to the implementation of the other systemically important institutions (O-SII) buffer and approach to identifying O-SIIs.
    • SS45/15 on UK leverage ratio framework, SS16/16 on minimum requirement for own funds and eligible liabilities (MREL), SS6/14 on capital buffers, SS32/15 on Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082, and PRA111
    • Updates to certain model requirements including Additional Leverage Ratio Buffer Model Requirements, Capital Buffers and Pillar 2A Model Requirements, and Additional Leverage Ratio Buffer Model Requirements.

    In CP12/20, PRA proposed new CRD5 requirements, covering Pillar 2, remuneration, intermediate parent undertakings, governance, and third-country branch reporting. In CP17/20, PRA proposed to implement elements of CRD5 related to holding company approval, the application of prudential requirements to approved holding companies, interest rate risk in the banking book (IRRBB), capital buffers, the maximum distributable amount, Pillar 2, and governance. It also proposed to update aspects of the UK regulatory framework as a result of amendments to the Capital Requirements Regulation (CRR), which apply during the transition period in relation to variable risk-weights for real estate exposures and methods of consolidation. PRA had received twelve responses to CP12/20 and four responses to CP17/20. After considering responses to CP12/20 and CP17/20, and taking into account minor corrections to the proposed draft policy, PRA has amended the certain aspects of its draft policies, including the following:

    • The date of application for the proposed approach to IRRBB has been amended from December 31, 2020 to December 31, 2021.
    • Internal Capital Adequacy Assessment Part of the PRA Rulebook on the treatment of commercial margins in the standardized framework has been amended to recognize practical challenges in incorporating commercial margins into risk-free rate
    • SS31/15 has been amended to include a clarification regarding group risk add-ons
    • The proposed rules in the Remuneration Part of the Rulebook and expectations set out in SS2/17 have been amended.
    • SS34/15 has been amended to clarify how firms can comply with the recovery plan reporting requirement when a branch recovery plan is not available.

    The policy material has been approved for publication as near-final versions by the relevant PRA governance committees, but the instruments have not been formally made at this stage. The near-final instruments are being published now to maximize the time that firms have to review the information before the final rules apply. PRA has not been able to publish final instruments at the time of publishing PS26/20, because the power for PRA to make rules imposing consolidated or sub-consolidated requirements on holding companies cannot be exercised by PRA before December 28, 2020. The final Rule instruments will be published in a subsequent policy statement in time for the implementation deadline of December 28, 2020, once the powers referred to above have come into effect. PS26/20 has been designed in the context of withdrawal of UK from EU and the current transition period, during which time the UK remains subject to European law. PRA also assessed whether any changes would be required owing to changes in the UK regulatory framework at the end of the transition period when EU law no longer applies in the UK. The near-final post transition period rules and supervisory statements reflect that consideration.

     

    Related Links

    Keywords: Europe, UK, Banking, CRD5, PRA Rulebook, Pillar 2, Governance, Reporting, Remuneration, ICAAP, SREP, Regulatory Capital, IRRBB, Credit Risk, Basel, Brexit Transition, PS26/20, CRR, PRA

    Featured Experts
    Related Articles
    News

    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.

    March 13, 2023 WebPage Regulatory News
    News

    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.

    March 12, 2023 WebPage Regulatory News
    News

    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.

    March 03, 2023 WebPage Regulatory News
    News

    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.

    March 02, 2023 WebPage Regulatory News
    News

    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.

    February 28, 2023 WebPage Regulatory News
    News

    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.

    February 28, 2023 WebPage Regulatory News
    News

    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.

    February 28, 2023 WebPage Regulatory News
    News

    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

    February 24, 2023 WebPage Regulatory News
    News

    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.

    February 21, 2023 WebPage Regulatory News
    News

    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

    February 20, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8793