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    PRA Proposes Simplified Obligations for Recovery Planning

    July 23, 2020

    PRA published the consultation paper CP10/20, with a proposal to allow certain firms to benefit from simplified obligations for recovery planning. This proposal is in light of the discretion PRA has under 4(1) of the Bank Recovery and Resolution Directive or BRRD (2014/59/EU) on whether to apply simplified obligations. The proposal involves changes to the supervisory statement SS9/17 on recovery planning and would reduce recovery planning expectations for certain firms. The comment period on CP10/20 closes on October 23, 2020. In the second half of 2020, PRA plans to publish the final policy statement and to notify the firms that are eligible for simplified obligations. Pending consideration of the responses to CP10/20, the amendments to SS9/17 would apply with immediate effect once the final policy statement is published.

    The proposals in CP10/20 relate to how PRA would perform the eligibility assessment process to determine which firms are eligible for simplified obligations in respect of recovery planning. The proposals also address the recovery planning expectations for firms deemed eligible for simplified obligations. For firms that are eligible for simplified obligations, the proposals seek to reduce the minimum number of scenarios considered in recovery planning to two and clarify that these firms are not expected to submit the information recovery plan information template referred to in SS9/17. CP10/20 is relevant to PRA-authorized UK banks, building societies, designated UK investment firms, and their qualifying parent undertakings to which the Recovery Plans Part of the PRA Rulebook applies.

    The proposals support the PRA approach to enhanced proportionality for smaller and non-systemic firms. PRA considers that the proposal introduces a more proportionate approach for recovery planning that would not cause firms to incur additional costs as a direct result of the proposals. The proposals set out in CP10/20 have been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to the European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018.

     

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    Comment Due Date: October 23, 2020

    Keywords: Europe, UK, Banking, Securities, Recovery Planning, Basel, BRRD, CP10/20, SS9/17, Resolution Framework, Proportionality, PRA

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