Featured Product

    PRA Proposes Updates to Pillar 2A Capital Framework in UK

    February 28, 2020

    PRA is proposing to update the Pillar 2A capital framework to take account of the additional resilience associated with higher macro-prudential buffer requirements in a standard risk environment. In this context, a key aspect of the proposal is to reduce variable Pillar 2A capital requirements. PRA proposes to apply the Pillar 2A reduction, where applicable, at the same time or before the 2% countercyclical capital buffer (CCyB) rate in UK comes into effect on December 16, 2020. This consultation closes on April 30, 2020. The proposed implementation date of the policy in the consultation paper is July 06, 2020.

    The proposals in this consultation only relate to the Financial Policy Committee (FPC) decision of December 16, 2019, to raise the level of the UK CCyB rate that it expects to set in a standard risk environment from in the region of 1% to in the region of 2%. Any subsequent changes in the UK CCyB rate brought about by changes in the FPC's view of the prevailing risk environment would not be reflected in the changes in Pillar 2A. The proposals in this consultation paper would make amendments to supervisory statement (SS31/15) on the Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP). The proposals clarify the considerations related to macro-prudential buffers that PRA takes into account when it carries out an overall assessment of the level of capital that would be sufficient to ensure the sound management and coverage of the risks of firms. 

    This consultation is part of a package that includes review of the structural level and balance of capital requirements for the UK banking system undertaken by FPC; this includes the subsequent increase in the UK CCyB rate that FPC expects to set in a standard risk environment and the clarification of BoE that, in resolution, it expects all debt that is bailed in to be written down or converted to common equity tier 1 (CET1). The purpose of this package is to:

    • Increase resilience—While leaving the overall loss-absorbing capacity for the banking system broadly unaffected, the changes would shift the balance of that capacity toward higher quality tier 1 capital.
    • Improve responsiveness of capital requirements to economic conditions—By shifting the balance of capital requirements from minimum requirements that should be maintained at all times toward buffers that can be drawn down as needed, these changes would mean that banks would be more able to absorb losses while maintaining lending to the real economy through the cycle.
    • Enhance resolvability—The intention of BoE, in resolution, to write down or convert debt to CET1 capital would make resolved banks more resilient to further losses, supporting their resolution and minimizing the wider economic costs of their failure.

    The consultation paper is relevant to the PRA-authorized UK banks, building societies, and designated investment firms.  The proposals have been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time the 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 EU take effect. PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018.

     

    Related Links

    Comment Due Date: April 30, 2020

    Effective Date: July 06, 2020

    Keywords: Europe, UK, Banking, CCyB, Pillar 2A, ICAAP, SREP, CET1, Capital Framework, FPC, Macro-prudential Policy, Resolution Framework, BoE, PRA

    Related Articles
    News

    BCBS Consults on Principles for Operational Risk and Resilience

    BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.

    August 06, 2020 WebPage Regulatory News
    News

    FSI Note Discusses Challenges Associated with COVID Relief Measures

    The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.

    August 06, 2020 WebPage Regulatory News
    News

    HKMA Announces Repayment Deferment Under Payment Holiday Scheme

    HKMA, together with the Banking Sector Small and Medium-Size Enterprise (SME) Lending Coordination Mechanism, announced a ninety-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme.

    August 05, 2020 WebPage Regulatory News
    News

    ESRB Paper Presents Alternative Approach to EBA Stress Test Proposal

    The Advisory Scientific Committee of ESRB published a response, in the form of an Insights Paper, to the EBA proposals for reforms to the stress testing framework in EU.

    August 05, 2020 WebPage Regulatory News
    News

    MAS Announces Key Initiatives to Support Adoption of SORA

    MAS announced several initiatives to support adoption of the Singapore Overnight Rate Average (SORA), which is administered by MAS.

    August 05, 2020 WebPage Regulatory News
    News

    BoE Updates Template and Definitions for Form ER

    BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.

    August 05, 2020 WebPage Regulatory News
    News

    PRA to Extend Temporary High Balance Coverage Amid COVID Crisis

    PRA published the policy statement PS19/20 on the final policy for extending coverage under the Financial Services Compensation Scheme (FSCS) for Temporary High Balance.

    August 04, 2020 WebPage Regulatory News
    News

    EBA Publishes Standards on Disclosure and Reporting of MREL and TLAC

    EBA published the final draft implementing technical standards for disclosures and reporting on the minimum requirements for own funds and eligible liabilities (MREL) and the total loss-absorbing capacity (TLAC) requirements in EU.

    August 03, 2020 WebPage Regulatory News
    News

    EBA Releases Erratum for Phase 2 Package on Reporting Framework 2.10

    EBA published an erratum for the phase 2 of technical package on the reporting framework 2.10.

    August 03, 2020 WebPage Regulatory News
    News

    EC Sets Out Updated Technical Information for Solvency II Calculations

    EC published the Implementing Regulation 2020/1145, which lays down technical information for calculation of technical provisions and basic own funds.

    August 03, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5635