PRA published a statement that provides guidance to regulated firms on the application of EBA guidelines on COVID-19 disclosures. On July 10, 2020, in a statement explaining its stance on the application of disclosure requirements in the EBA guidelines, PRA had clarified that it expects certain UK banks and building societies to make disclosures similar to those prescribed by the EBA guidelines while incorporating a number of modifications set out by PRA. PRA has now published the COVID-19 disclosure templates to be used for this purpose, along with the disclosure timelines.
PRA published letters in March 2020 and June 2020 to set out guidance to promote consistent and robust application of the definition of default in the Capital Requirements Regulation (CRR), specifically in the context of COVID-19 payment deferrals. The PRA guidance took into account the separate guidance to firms issued by FCA in relation to payment deferrals. Since the form of payment moratoria or similar measures available in the UK may be broader than those specified in the EBA guidelines on legislative and non-legislative moratoria on loan repayments (EBA/GL/2020/02), PRA considers it appropriate for firms to make disclosures that reflect the UK approach to payment deferrals. PRA has produced amended versions of the instructions and definitions.
As highlighted in the statement on July 10, 2020, PRA realizes there may be practical difficulties as the EBA guidelines and templates were published close to the June 30, 2020 disclosure reference date. Thus, PRA does not expect firms to include these disclosures in the main disclosures for the June 30, 2020 reporting period and accepts that firms may need to make disclosures for the June 30, 2020 reference date at a later time. This may involve firms making these additional disclosures separately to the main Pillar 3 report for the June 30, 2020 reference date. Disclosures for subsequent reference dates, including December 31, 2020, should be made as part of the Pillar 3 report. Relevant firms should make disclosures in accordance with this letter on a biannual basis. Firms may disclose as at June 30 and December 31, or may disclose at the half-year and year-end dates for their financial year if they have an accounting reference date other than December 31. PRA expects firms to continue making disclosures for reporting periods ending on dates up to and including December 31, 2020. PRA will keep its approach to these disclosures under review for disclosure reference dates after December 31, 2020.
The UK banks and building societies that should make these disclosures are those that are, or are controlled by, global or other systemically important institution designated by PRA in the most recent list and those that have retail deposits equal to or greater than GBP 50 billion on an individual or consolidated basis. PRA expects such firms to make these disclosures for the highest level of consolidation in the UK. EBA guidelines require firms to make disclosures in three templates. Templates one and two relate to moratoria, while Template three relates to public guarantee schemes. In Templates 1 and 2 firms are being expected to disclose loans and advances that were subject to moratoria on loan repayments applied in light of the COVID-19 crisis and in accordance with the criteria set out in the earlier EBA guidelines.
- PRA Statement on Disclosure Templates
- Disclosure Templates (XLSX)
- PRA Statement on Disclosures, June 2020
- EBA Guidelines
Keywords: Europe, UK, Banking, COVID-19, Loan Moratorium, Payment Deferrals, Credit Risk, Disclosures, CRR, Basel, Loan Guarantee, FCA, PRA
PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).
EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.
EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.
EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.
PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.
MAS published a statement guidance on dividend distribution by banks.
APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.
EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.
SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.