PRA is proposing (CP15/19) to apply a tighter limit for large exposures to certain French non-financial corporations (NFCs), to reciprocate the measure imposed by France. The proposal would be effected through amendments to the Large Exposures Part of the PRA Rulebook (Appendix 1). PRA proposes to tighten the large exposures limit to 5% of eligible capital in respect of the exposures of UK global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) to French NFCs. The proposed measure applies under the Capital Requirements Directive, or CRD, as implemented in the Capital Requirements (Capital Buffers and Macro-prudential measures) Regulations 2014. The planned implementation date for the proposal in CP15/19 is January 01, 2020. The consultation closes on September 06, 2019.
ESRB has recommended a European Economic Area (EEA) wide reciprocation of a macro-prudential measure imposed by Haut Conseil de stabilité financière (HCSF) in France in July 2018, under the Capital Requirements Regulation, or CRR Article 458 (the HCSF measure). PRA proposes to tighten the large exposures limit to 5% of eligible capital in respect of the exposures of UK G-SIIs and O-SIIs to French NFCs meeting the definition of "highly indebted," as set out in the HCSF measure. The limit will apply on a consolidated basis to exposures with an original value (prior to the application of any credit risk mitigation techniques and exemptions under the Large Exposures Part of the CRR) of greater than EUR 300 million, treating exposures to a group of connected French NFCs as a single exposure.
The proposed rule incorporates the materiality threshold in the ESRB Recommendation. The threshold exempts firms that have an aggregate exposure to the French NFC sector (on a consolidated basis) of less than EUR 2 billion (prior to the application of any credit risk mitigation techniques and exemptions under the Large Exposures part of the CRR). The materiality threshold also exempts firms that do not have relevant exposures greater than both EUR 300 million and 5% of eligible capital to a single French NFC, or a "connected group" of French NFCs.
The proposals set out in CP15/19 have been designed in the context of the current UK and EU regulatory framework. PRA has assessed that the proposal will be affected in the event that UK leaves EU with no implementation period in place. A second version of the proposed amendments to PRA Rulebook rules, which includes the relevant changes related to the withdrawal of UK from EU, is set out in Appendix 2.
Comment Due Date: September 06, 2019
Effective Date: January 01, 2020 (Planned)
Keywords: Europe, UK, France, Banking, Large Exposures, CRR, CRD, PRA rulebook, HCSF Measure, G-SII, O-SII, CP 15/19, Concentration Risk, PRA
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.