Featured Product

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    January 12, 2022

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022. Meanwhile, the Bank of England (BoE) published a summary of the meeting of the Data Standards Committee, with the participants agreeing that BoE Secretariat will provide a list of firms interviewed for commercial real estate, delivery group proposing that BoE and FCA standardize the counterparty category definitions, and members agreeing to commission a data standards review. In addition, the Prudential Regulatory Authority (PRA) published its 2022 priorities for UK deposit-takers and international banks active in UK. The priorities address factors such as financial resilience, credit and model risks, operational risk and resilience, regulatory reporting, and financial risks arising from climate change.

    PRA plans to continue to engage with deposit-takers to assess the robustness of their credit risk management practices, with four ongoing thematic reviews on wholesale problem debt management, unsecured personal loans, buy-to-let, and IFRS 9 retail models. PRA also plans to continue to focus on the implementation of internal ratings-based (IRB) hybrid mortgage models, IRB roadmap for non-mortgage portfolios, and IRB aspirant firm model applications. Another aim is to increase focus on the effectiveness of model risk management practices and the remediation actions firms are taking. In addition to this, PRA has set out the following common priorities for supervision of deposit-takers and international banks:

    • Financial resilience. PRA will continue to engage with firms to assess the challenges that the structural changes bring to sustainability of business models. BoE will conduct a stress test in 2022, using the Annual Cyclical Scenario framework, to explore the financial resilience of major UK banks and building societies. Assessing the risk culture and the incentive structures in place at firms and aligning remuneration with risk management practices will constitute key priorities of the supervisory work with firms engaged in equity finance and the broader prime brokerage business. In addition, the theme of global regulatory cooperation will continue into 2022.
    • Operational risk and resilience. PRA intends to continue to assess firms’ progress in developing dynamic, effective operational risk and control frameworks to manage the threat of operational disruptions. It expects firms to develop their security controls and capabilities to manage the increasing risk of cyber threats. It also encourages all firms, regardless of size, to test their resilience against such threats. By March 31, 2022, firms are expected to have identified and mapped their important business services, to have set impact tolerances for these business services, and to have initiated a program of scenario testing. PRA will continue to review firms’ programs and their implementation.
    • Financial risks arising from climate change. PRA expects firms to take a forward-looking, strategic, and ambitious approach to managing climate-related financial risks. This approach should be proportionate to the scale of the risks and the complexity of a firm’s operations. From 2022, PRA will incorporate supervision of climate-related financial risks into its core supervisory approach. The assessment of a firm’s management of climate-related financial risks will be included in all relevant elements of the supervisory cycle. PRA also expects firms to refine and innovate to better integrate climate-related financial risk management across their organization. PRA will focus on how firms quantify climate-related risks and incorporate those risks into business strategies, decision-making, and risk-taking. Furthermore, PRA will keep a range of supervisory tools under review for use where it deems progress to be insufficient.
    • Regulatory reporting and data quality. PRA expects the regulatory reporting process to receive no less care, diligence, and rigor than financial reporting. PRA is expanding its program of using skilled person’s reviews to verify the accuracy of regulatory returns, which will continue in 2022. Longer term, joint industry-BoE work on transforming data collection, creates the opportunity for better quality reporting at lower cost and PRA encourages firms to engage with this initiative.
    • Other areas of supervisory focus. Together with FCA, PRA will closely monitor actions to remove any remaining dependencies on LIBOR, including synthetic LIBOR. PRA also expects firms to use the most robust alternative reference rates to LIBOR. BoE and PRA will continue to prioritize resolution going forward. The Resolvability Assessment Framework applies to firms where the preferred resolution strategy is bail-in or partial-transfer. These firms should continue to work to ensure that they achieve, and can continue to maintain, the resolvability outcomes and ensure that they are transparent in their disclosures about the preparations for resolution.


    Related Links

    Keywords: Europe, UK, Banking, Securities, Securitization Repositories, Securitization Framework, Data Transformation, Credit Risk, Climate Change Risk, ESG, Operational Risk, LIBOR, Interest Rate Benchmarks, Work Priorities, Reporting, Modeling Risk, FCA, BoE, PRA

    Featured Experts
    Related Articles

    CFPB Finalizes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.

    March 30, 2023 WebPage Regulatory News

    BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023

    The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.

    March 23, 2023 WebPage Regulatory News

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory 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

    US Congress Report Examines Data Privacy and Cybersecurity Regulations

    The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.

    March 13, 2023 WebPage Regulatory 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

    EU to Conduct One-Off Scenario Analysis to Assess Transition Risk

    The European authorities recently made multiple announcements that impact the banking sector.

    March 10, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory 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

    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
    RESULTS 1 - 10 OF 8810