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

    BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks

    A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.

    July 29, 2022 WebPage Regulatory News
    News

    EBA Examines Remuneration Data and Use of Large Exposure Exemptions

    The European Banking Authority (EBA) published a report that examines the use of certain exemptions included in the large exposures regime under the Capital Requirements Regulation (CRR).

    July 22, 2022 WebPage Regulatory News
    News

    BoE Issues Update on Ongoing Data Transformation Program

    The Bank of England (BoE) issued a communication to firms to provide an update on the progress of the joint data transformation program—which is being led by BoE, the Financial Conduct Authority (FCA), and the industry—for the financial sector in UK.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues Draft Methodology and Templates for 2023 Stress Tests

    The European Banking Authority (EBA) published the draft methodology, templates, and template guidance for the European Union-wide stress test in 2023.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues SREP Guidelines and Standards for Investment Firms

    The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published the final guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.

    July 21, 2022 WebPage Regulatory News
    News

    BoE and PRA Publish Regulatory Updates for Financial Sector Entities

    The Prudential Regulatory Authority (PRA) proposed expectations, via CP8/22, in respect of changes to the instruments or claims that comprise unvested deferred sums awarded to material risk-takers as part of their variable pay.

    July 19, 2022 WebPage Regulatory News
    News

    EIOPA Issues Taxonomy for Solvency II Reporting, Issues Other Updates

    The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.7.0 of the Solvency II data point model (DPM) and XBRL taxonomy.

    July 16, 2022 WebPage Regulatory News
    News

    OSFI Updates Address BCAR Reporting, Basel Reforms, and Cyber Risk

    The Office of the Superintendent of Financial Institutions (OSFI) updated the 2023 Basel Capital Adequacy Reporting (BCAR) manual as well as the 2023 BCAR return.

    July 15, 2022 WebPage Regulatory News
    News

    FSB Report Outlines Progress on Climate Risk Roadmap

    In a letter to the G20 Leaders, ahead of the July 2022 meeting, the Financial Stability Board (FSB) Chair set out an overview of the key work done by FSB.

    July 14, 2022 WebPage Regulatory News
    News

    SRB Issues Resolvability Assessment and Bail-in Implementation Guide

    The Single Resolution Board (SRB) published its resolvability assessment and "heat map" for 2021, updated the operational guidance on implementation of bail-in tool, and issued the annual report for 2021.

    July 14, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8400