PRA published a letter confirming that firms are no longer expected to submit the FSA047/048 returns after January 23, 2020. This letter from Sarah Breeden, the Executive Director of UK Deposit Takers Supervision, and David Bailey, the Executive Director of International Banks Supervision, has been addressed to the CFOs. This letter refers only to the enhanced liquidity monitoring by PRA in the lead up to EU withdrawal. Liquidity coverage and other business-as-usual obligations (including firm-specific Pillar 2 guidance) remain unchanged and continue to apply. In line with the published PRA policy, PRA expects firms to continue to prudently manage their liquidity positions on an individual currency basis.
PRA has been monitoring the liquidity positions of the largest and most systemically important banks and investment firms active in the UK against a bespoke risk appetite. This had been designed to reflect the potential for market volatility, should the UK leave the European Union without a Withdrawal Agreement, to impact firms’ liquidity positions. This risk appetite has been based on the firms’ liquidity positions reported through the FSA047/048 returns and expressed as a minimum survival period calculated under different wholesale stress scenarios. The parliamentary stages of the European Union (Withdrawal Agreement) Bill were completed on January 22. Since, as of the date of this letter, the likelihood that the UK would leave the EU without a Withdrawal Agreement appeared very low, PRA no longer considered the bespoke risk appetite to be required.
Following the third extension of Article 50, in October 2019, PRA had asked the firms to continue to submit FSA047/048 returns after December 31, 2019, the date at which it had previously planned to cease their collection, to facilitate the continued monitoring against the bespoke risk appetite. With the change in risk appetite, PRA can confirm that firms are no longer expected to submit these returns after January 23. However, where firms had been asked to continue reporting their FSA047/048 returns after December 31, 2019, PRA asks that they maintain this capability to report, if required, until the end of February 2020. PRA states that firms should continue to assess, manage, and mitigate risks arising from the UK’s withdrawal from the European Union on an ongoing basis. The Authority expects firms to remain mindful of the operational implications of withdrawal, ensuring they are able to maintain good governance and manage their post-Brexit operations appropriately.
Related Link: Letter (PDF)
Keywords: Europe, UK, Banking, Liquidity Risk, Brexit, Withdrawal Agreement, Reporting, FSA 047, FSA 048, Pillar 2, PRA
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