Featured Product

    BoE Publishes Financial Stability Report in July 2019

    July 11, 2019

    BoE published the financial stability report, which sets out the view of the Financial Policy Committee (FPC) on stability of the financial system in UK. It covers the assessment, by FPC, of the resilience of financial system and the main risks to the financial stability, along with the actions being taken to mitigate the identified risks. It also reports on the activities of FPC over the reporting period and on the extent to which the previous policy actions of FPC have succeeded in meeting its objectives. BoE also published the record of the FPC meetings held on June 13, 2019 and July 04, 2019. The next policy meeting of FPC will be on October 02, 2019.

    The report highlights that the core of UK financial system, including banks, dealers, and insurance companies, is resilient to, and prepared for, the wide range of risks it could face, including a worst-case disorderly Brexit. FPC is maintaining the UK countercyclical capital buffer (CCyB) rate at 1%. The report specifies that most financial stability risks stemming from disruption to cross-border financial services in a no-deal Brexit have been mitigated. However, in the absence of further action by EU authorities, some disruption to cross-border financial services is possible. Although such disruption would primarily affect EU households and businesses, it could amplify volatility and spill back to the UK in ways that cannot be fully anticipated or mitigated.

    BoE will, in 2019, conduct a biennial exploratory exercise to explore the implications of a severe and broad-based liquidity stress affecting major UK banks simultaneously. Banks hold regulatory liquidity buffers that FPC expects to be used in a stress. The exercise will explore how the reactions of banks and authorities to the stress would shape its impact on the broader financial system and the UK economy. BoE intends to publish the results of the exploratory exercise in mid-2020. The report notes that in the 2021 biennial exploratory scenario, BoE will stress test resilience of the financial system to the physical and transition risks of climate change. It will gather views on the design of the exercise and, as a first step, will publish a discussion paper in Autumn 2019. This exercise will integrate climate scenarios with macroeconomic and financial system models. This will also motivate firms to address data gaps and to develop cutting-edge risk management consistent with a range of possible climate pathways—ranging from early and orderly to late and disruptive. The discussion paper will cover issues such as the coverage of the test, the nature of scenarios considered, and the appropriate time horizon and disclosure of results. 

    The report mentions that continued reliance of global financial markets on LIBOR poses risks to financial stability that can be reduced only through a transition to alternative benchmark rates by the end of 2021. The pace of market participants’ transition efforts now needs to accelerate and FPC will monitor the progress closely. The smoothest transition will be one in which market participants cease new issuance of LIBOR-linked contracts; identify all existing contracts without appropriate fallback clauses and rectify this to the greatest extent possible; and actively reduce legacy exposures by negotiating their transition to new rates. It is not in firms’ own interests to have a large stock of legacy contracts that will become subject to significant legal uncertainty beyond 2021. There are advantages to re-negotiating contracts to refer to alternative reference rates well in advance of the end of 2021. Well-managed firms are expected to lead the transition. All firms that responded to the PRA’s and FCA’s Dear CEO letter have now appointed a Senior Manager accountable for overseeing the transition.

     

    Related Links

    Keywords: Europe, UK, Banking, Insurance, Securities, Financial Stability Board, Brexit, CCyB, LIBOR, Stress Testing, Systemic Risk, Climate Change Risks, FPC, BoE

    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 Publishes Multiple Regulatory Updates for Regulated Entities

    The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.

    July 29, 2022 WebPage Regulatory News
    News

    APRA Consults on Prudential Standard for Operational Risk

    The Australian Prudential Regulation Authority (APRA) is seeking comments, until October 21, 2022, on the introduction of CPS 230, which is the new cross-industry prudential standard on operational risk management.

    July 28, 2022 WebPage Regulatory News
    News

    EC Amends Rule on Securitizations; ESRB Updates Reciprocation Measures

    The European Commission published a Delegated Regulation 2022/1301 on the information to be provided in accordance with the simple, transparent, and standardized (STS) notification requirements for on-balance-sheet synthetic securitizations.

    July 27, 2022 WebPage Regulatory News
    News

    APRA Announces Revisions to Capital Framework for Banks

    The Australian Prudential Regulation Authority (APRA) is announced revisions to the capital framework for authorized deposit-taking institutions to implement the "unquestionably strong" capital ratios and the Basel III reforms.

    July 26, 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

    UK Authorities Publish Discussion Paper on Critical Third Parties

    The Bank of England (BoE), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) published a joint discussion paper that sets out potential measures to oversee and strengthen the resilience of services provided by critical third parties to the financial sector in UK.

    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
    RESULTS 1 - 10 OF 8407