PRA issued a letter requesting an update on the progress in adopting the recommendations of the Taskforce on Disclosures about expected credit losses (ECLs). The letter has been issued from Victoria Saporta, Executive Director, Prudential Policy, to the Chief Financial Officers. In the letter, firms are also expected to inform PRA about the plans for adopting the recommendations that have not been adopted in full so far. Responses from firms will help PRA in its work toward encouraging UK banks to embrace the objective underlying the Taskforce’s work, which is the provision of a high-quality, comprehensive, and comparable set of ECL disclosures.
The Taskforce on Disclosures about Expected Credit Losses has issued two reports on what good ECL disclosures. The first report, which was published in November 2018, sets out recommendations on a comprehensive set of IFRS 9 ECL disclosures. A year later, the Taskforce issued a second report that amended the recommendations in the first report and supplemented those consolidated recommendations with material intended to be helpful in guiding firms toward disclosure formats that are broadly harmonized. In its letter in January 2019, PRA had mentioned that it expects firms to adopt these recommendations in full, consistent with the commitments made in the British Bankers’ Association Code for Financial Reporting Disclosure (BBA Disclosure Code). Firms were encouraged to make progress as quickly as possible and informed that PRA would from time-to-time be asking firms to update on that progress. Thus, PRA is requesting an update on how firms have, to date, responded to that material and what are the plans for responding to it in the future. The letter mentions that providing this information is voluntary.
PRA published another letter that is addressed to the Non-Executive Directors who participated in the PRA pilot program of virtual meetings with PRA Senior Advisors that took place in 2020. The objective of these meetings was to provide an informal opportunity to discuss issues and risks that were on board agendas. The meetings addressed, among others, the effect of economic downturn on business models, operational resilience in light of the new working environment, governance challenges, supervisory approach to climate-related financial risks, and feedback, to PRA, on the regulatory landscape. One of the conclusions of these discussions, as stated in the letter, is that it is clear that coronavirus and its aftermath will continue to create uncertainty in the banking and insurance sectors.
Keywords: Europe, UK, Banking, ECL, IFRS 9, Climate Change Risk, Governance, Accounting, Financial Instruments, Disclosures, PRA
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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