PRA published an occasional consultation paper (CP13/21) that sets out proposals to make minor amendments to the PRA Rulebook, supervisory statements, and reporting data items and instructions, including the Branch Return and the associated guidance and notes. The comment period for these proposals closes on August 25, 2021 and they cover topics such as Pillar 2A reporting, reporting changes due to London Inter-bank Offered Rate (LIBOR) discontinuation, Definition of Capital Part of PRA Rulebook, branch return, and Audit Committee Part of the PRA Rulebook. In general, the proposed changes are relevant for banks, building societies, the Capital Requirements Regulation (CRR firms), and PRA-designated investment firms, PRA-supervised third-country branches, and UK Solvency II insurance and reinsurance firms.
The amendments cover the following topics:
- Pillar 2A.The proposals in Chapter 2 of this paper would result in amendments to the reporting Pillar 2 Part of the PRA Rulebook (Appendix 1); SS32/15 on Pillar 2 reporting (Appendix 2); FSA081 template (Appendix 3); and the associated FSA081 instructions (Appendix 4). In the FSA081 template, PRA proposed to add a new asset category for insured annuities; two new entries for the life expectancies assumed for current and future pensioners; and a tick box to confirm the latest funding valuation documentation has been submitted alongside the FSA081 template. PRA also proposed to remove the asset category for other assets (data item number 220). PRA proposed to require all firms submitting an FSA081 to provide the asset and liability sensitivities known as ‘PV01’ and ’IE01’ (that is, data items 230, 240, 280, and 290 in the existing FSA081); this requirement only applies to significant firms. PRA also proposed to make formatting changes to the FSA081 template. PRA proposed to revise the FSA081 instructions to reflect these change and to improve the guidance for the existing data requirements. FSA081 data item and instructions are contained in SS32/15. Thus PRA proposed to update the relevant appendices in SS32/15, with the links to the amended data item and instructions subject to the outcome of this consultation, as shown in Appendix 2. This chapter is relevant to banks, building societies, and PRA-designated investment firms.
- Reporting changes due to LIBOR discontinuation. In Chapter 3 of the consultation paper, PRA proposed changes to reporting requirements to delete the Undertakings Collective Investment Transferable Securities (UCITS) legacy template FSA042 and to prepare for the expected discontinuation of LIBOR after the end of 2021. These proposals would result in an update to the regulatory reporting Part of the PRA Rulebook (Appendix 5); an update to SS34/15 on guidelines for completing regulatory reports (Appendix 6); deletion of the UCITS template (FSA042) from the PRA Rulebook; amendments to the "Interest rate gap report" (FSA017) and associated instructions (Appendix 7); and amendments to the Notes for completion of MLAR (Appendix 8). PRA proposed to replace LIBOR in the FSA017 instructions with compounded Sterling Overnight Index Average (SONIA) for the purposes of referencing an interest rate benchmark. This chapter is relevant to banks, building societies, and PRA-designated investment firms
- Definition of Capital. In Chapter 4, PRA sets out a proposal to change the scope of the Definition of Capital Part of the PRA Rulebook, to refer entities as the Capital Requirements Regulation (CRR) firms rather than UK banks. The proposal would result in the deletion of Rule 4.1 in the Definition of Capital Part of the PRA Rulebook (Appendix 9) and in an update to SS7/13 titled "Definition of capital (CRR firms)" (Appendix 10). This chapter is relevant to CRR firms. The Definition of Capital Part of the PRA Rulebook requires firms to assess whether funding to connected counterparties is of a capital nature; if so, it requires firms to treat it in a similar way under the relevant CRR requirements. Due to this change, PRA proposed to replace existing references to "banks" with "firms" in Section 8 of SS7/13, subject to the outcome of this consultation.
- Branch Return. In Chapter 5, PRA sets out proposals with regard to the Branch Return, to amend the method of submission, make minor formatting corrections to the Branch Return, and to clarify the accompanying reporting guidance. These proposals would result in amendments to the Regulatory Reporting Part of the PRA Rulebook (Appendix 5); an update to SS34/15 on guidelines for completing regulatory reports’ (Appendix 11); an updated Branch Return template (Appendix 12); and an updated reporting guidance (Appendix 13). PRA proposed to change the method of submission of the Branch Return from Excel templates submitted via e-mail, to a submission of XML-format documents via the BoE Electronic Data Submission (BEEDS) portal. PRA proposed other minor formatting changes to the Branch Return and note that this chapter is relevant to the PRA-supervised third-country branches.
- Audit Committee and Auditors. In Chapter 6, PRA sets out proposals to correct and update a reference in Rule 2.4(5) in the Audit Committee Part of the PRA Rulebook (Appendix 14) and to correct an error in SS1/16 titled "Written reports by external auditors to the PRA" (Appendix 15). This chapter is relevant to Audit Committee – CRR firms, UK Solvency II insurance and reinsurance firms, the Society of Lloyd’s and managing agents, and Auditors – major UK banks and building societies, as set out in Chapter 8 of the Auditors Part of the PRA Rulebook.
Pending consideration of the responses to this consultation, the proposed implementation dates for the changes resulting from this consultation are December 01, 2021 for Chapter 2; January o1, 2022 for Chapters 4 and 6; and on publication of the final policy for Chapters 3 and 5.
Comment Due Date: August 25, 2021
Keywords: Europe, UK, Banking, Insurance, Securities, PRA Rulebook, CP13/21, LIBOR, CRR, Reporting, Branch Return, BEEDS, FSA081, Investment Firms, Pillar 2, Basel, Regulatory Capital, PRA
Previous ArticleFED Extends PPPLF to July 2021, Updates Forms FR Y-14Q and FR Y-9C
The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.