BoE Policy Committee Deliberates on CCyB Rate and Cyber Stress Tests
The Financial Policy Committee (FPC) of BoE met recently to identify risks to financial stability and agree on policy actions to safeguard the resilience of the UK financial system. As per the published meeting summary, FPC decided that it expects to maintain the UK countercyclical capital buffer (CCyB) rate at 0% until at least December 2021. Any subsequent increase would not be expected to take effect until the end of 2022. The pace of return to a standard UK CCyB rate in the region of 2% would depend on banks’ ability to rebuild capital while continuing to support the UK economy, households, and businesses. FPC judged that this guidance should help to give banks clarity that they could use capital buffers as necessary. Other topics of discussion at the meeting included the status of LIBOR transition, continued monitoring of financial stability implications of Brexit, results of joint BoE-FCA review of open-ended investment funds, and the next cyber stress testing exercise.
The work on the next cyber stress test has already restarted and FPC would provide more information on the 2022 cyber stress test in due course. At the March 2021 meeting, FPC discussed its impact tolerance for payments services and initial plans for a 2022 stress test. FPC agreed that the 2022 cyber test should involve a scenario where data integrity had been compromised. This would build on the finance industry’s own work. FPC agreed that the 2022 test should target the most systemic contributors in the end-to-end payments chain, as in the event of disruption, their ability to resume services in a timely manner was particularly important for UK financial stability. FPC further agreed to focus the next cyber stress test on retail payments, so that the results from the test could help shed light on the potential financial stability impact of disruption to retail payments. Building on the lessons of the 2019 pilot, the 2022 test would be expanded to include second-round effects. Participants would be asked to document how they would meet the FPC’s impact tolerance, or, if they were not able to do so, what the impact might be. Firms would also be asked to document any barriers to meeting the FPC’s impact tolerance and to explore the extent to which their recovery options might depend on the actions of other participants. Finally, FPC agreed that the 2022 test would be an exploratory test, rather than a formal pass-fail assessment. Participating firms would, however, be expected to share their findings and plans with their supervisors.
Related Links
Keywords: Europe, UK, Banking, Basel, Regulatory Capital, CCyB, COVID-19, Cyber Risk, Stress Testing, Data Integrity, IBOR Reform, Financial Stability, FPC, BoE
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.
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Previous Article
APRA Issues Update on New Data Collection System APRA ConnectRelated Articles
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
