PRA Proposes to Update the Pillar 2 Capital Framework for Banks
PRA is proposing (CP5/19) to update the Pillar 2 capital framework to reflect continued refinements and developments in setting the PRA buffer (Pillar 2B). The proposals cover hurdle rate in stress, buffer interactions and usability, the risk management and governance assessment, updating benchmarks to assess Pillar 2A credit risk, and corrections to certain minor drafting errors. Comment period on the consultation ends on June 13, 2019 and PRA proposes to implement the amendments by October 01, 2019.
To implement the changes in the consultation, PRA proposes to update the following:
- Statement of Policy on PRA’s methodologies for setting Pillar 2 capital (Appendix 1)
- Supervisory statement (SS31/15) on Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) (Appendix 2)
- SS6/14 on implementing the Capital Requirements Directive (CRD IV) provisions on capital buffers. (Appendix 3)
CP5/19 is relevant to PRA-authorized banks, building societies, and PRA-designated investment firms. The purpose of these proposals is to bring greater clarity, consistency, and transparency to the capital-setting approach of PRA. In promoting a greater level of transparency, PRA seeks to promote financial stability, the safety and soundness of PRA-authorized firms, and facilitate more informed and effective capital planning for banks.
Related Links
Comment Due Date: June 13, 2019
Keywords: Europe, UK, Banking, Basel III, Pillar 2, Capital Framework, Credit Risk, CRD IV, Pillar 2B, CP5/19, SS31/15, SS6/14, ICAAP, SREP, PRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
NBB on Implementing EBA Guidelines on Uniform Disclosures Under CRRRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
