PRA Further Reprioritizes Work to Support Firms Amid COVID Crisis
PRA published a statement detailing plans to support firms in focusing their resources on the highest priority work amid COVID-19 outbreak. The announcement covers tasks related to climate change risks, calculation of stressed value-at-risk (SVAR), data reporting for LIBOR transition, and postponement of the insurance stress test. Overall, PRA continues to consider and make other adjustments to ease the burden on regulated entities. BoE also published its interim financial stability report, which covers views on performance of the financial system during the COVID-19-related disruption and the resulting outlook for UK financial stability.
Announcements on climate change work
The Prudential Regulation Committee (PRC) and the Financial Policy Committee (FPC) agreed to postpone the launch of the climate biennial exploratory scenario exercise until at least mid-2021. BoE will continue to work to better understand and mitigate the climate change risks:
- PRA will issue follow-on guidance on the supervisory statement (SS3/19) on enhancing firms’ approaches to managing the financial risks from climate change. Furthermore, the outputs from the Climate Financial Risk Forum will be published in the Summer.
- BoE will work with other central banks within the Network for Greening the Financial System, through which guides on key issues like supervision and scenario analysis will shortly be published.
- BoE will also assist the government with its preparations for COP26. The "COP26 Private Finance Agenda" was launched to help private finance support the economy's transition to net zero.
- BoE will continue to focus on embedding climate disclosure across the financial system, including through its own disclosures.
Other reprioritizations or relaxations
- In an earlier supervisory statement on market risk (SS13/13), PRA had set expectations on how the twelve-month period used for SVAR should be calculated and how frequently it should be reassessed. PRA is now confirming that it does not expect firms to update their SVAR twelve-month period during the current period of financial market stress, other than if a firm’s current period no longer represents a significant period of stress for the portfolio of the firm. PRA will permit firms to delay the review of the choice of historical data until December 2020, in line with the EBA guidance.
- Due to COVID-19, PRA and FCA suspended transition data reporting at the end of the first quarter and cancelled certain firm meetings, which were to be held in the first quarter. In light of the developments since, PRA and FCA have decided to resume full supervisory engagement on LIBOR from June 01, 2020, including data reporting at the end of the second quarter.
- PRA decided to pause further work on the Insurance Stress Test, given other pressures on firms and the need to focus on COVID-19 specific stresses. PRA will, therefore, not be publishing the results of last year’s test and will postpone the next Insurance Stress Test to 2022, with a view to seeking feedback from firms on the proposed design during the fourth quarter of 2021.
Related Links
Keywords: Europe, UK, Banking, Insurance, Securities, COVID-19, Climate Change Risk, Financial Stability Report, LIBOR, Deadline Extension, ESG, Stress Testing, Value-at-Risk, CRR, Reporting, Market Risk, BoE, PRA
Featured Experts
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Previous Article
Central Bank of Ireland Updates Notes on AnaCredit ReportingRelated Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
