Featured Product

    PRA Consults on Methodologies for Assessing Pillar 2 Liquidity Risk

    July 13, 2017

    The PRA published a consultation paper (CP13/17) that sets out proposals on a cash flow mismatch risk (CFMR) framework and other PRA methodologies for assessing liquidity risk of firms, under the Pillar 2 liquidity framework. CP13/17 also proposes updates to the supervisory statements SS24/15 and SS34/15, draft reporting rule changes, and a draft reporting template and instructions related to CFMR. This consultation closes on October 13, 2017.

    The PRA proposes to assess CFMR on both a consolidated currency and single currency basis and to introduce a new liquidity reporting template (PRA110) to monitor CFMR. The PRA also proposes:

    That firms should survive throughout the granular Liquidity Covering Requirement (LCR) stress scenario on a consolidated currency basis

    To collect the new liquidity reporting template on a weekly basis with a one-day remittance period for large firms, and a monthly basis with a fifteen day remittance period for small firms

    To assess prime brokerage and matched book risks based on the LCR rates for secured transactions and supervisory judgment

    To assess margined derivatives liquidity risks considering the firm’s historical initial margin posted and received, with a stress uplift applied

    To assess securities financing margin liquidity risks based on the firm’s historical margin posted, with a stress uplift applied

    To assess intragroup liquidity risk on a case-by-case basis, taking into account intragroup interconnectedness

    To assess liquidity systems and controls risks based on supervisory judgment of quantitative and qualitative issues

     

    The entry into force of the proposed survival guidance under the granular LCR stress will be linked to the implementation of the new PRA110 report proposed for January 01, 2019. The implementation of the new Pillar 2 methodologies is envisaged to commence in early 2018. This consultation builds on the earlier PRA proposals, particularly those in CP21/16, wherein the PRA had outlined the objectives of the Pillar 2 framework, its scope, and planned future work. PRA also proposed a Statement of Policy on its approach to three Pillar 2 risks: intraday liquidity, debt buyback, and non-margined derivatives. It made proposals on the level of application of Pillar 2 and the PRA’s expectations related to disclosure of Pillar 2. CP13/17 outlines how feedback on CP21/16 was taken into account and seeks early views on aspects of the calibration of overall liquidity requirements, which will be the subject of a third consultation. CP13/17 is relevant to UK banks, building societies, and PRA-designated investment firms.

     

    Related Links

    CP13/17 (PDF)

    Reporting Template, PRA110 (XLSX)

    Reporting Instructions, PRA110 (PDF)

    Comment Due Date: October 13, 2017

    Keywords: Europe, PRA, United Kingdom, Pillar 2, Liquidity Risk, Banking, Cash Flow Mismatch Risk, PRA110

    Related Articles

    PRA Publishes Q&A on Property Valuation Requirements Under CRR

    PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.

    May 29, 2020 WebPage Regulatory News

    EBA Publishes Guidelines on Loan Origination and Monitoring

    EBA published guidelines on loan origination and monitoring, which bring together prudential standards and consumer protection obligations, along with the anti-money laundering and the Environmental, Social, and Governance (ESG) considerations.

    May 29, 2020 WebPage Regulatory News

    EBA Proposes Revised Standards for Own Funds and Eligible Liabilities

    EBA published a consultation paper on the draft amended regulatory technical standards on own funds and eligible liabilities.

    May 29, 2020 WebPage Regulatory News

    EBA Sets Out Supervisory Convergence Plan for 2020

    EBA published a report on convergence of supervisory practices in 2019.

    May 29, 2020 WebPage Regulatory News
    News

    IOSCO Consults on Outsourcing Principles for Operational Resilience

    IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.

    May 28, 2020 WebPage Regulatory News
    News

    MAS Consortium to Develop AI Fairness Metrics for Credit Scoring

    MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.

    May 28, 2020 WebPage Regulatory News

    BoE Updates Definitions for BTL Data Collection

    BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.

    May 28, 2020 WebPage Regulatory News
    News

    FSI Examines Financial Stability Implications of Payment Deferrals

    FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.

    May 28, 2020 WebPage Regulatory News
    News

    RBNZ Publishes Financial Stability Report for May 2020

    RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.

    May 27, 2020 WebPage Regulatory News
    News

    PRA Finalizes Policy on Prudent Person Principle Under Solvency II

    PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.

    May 27, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5234