PRA Issues Policy Statements on Refining Pillar 2A Capital Approach
The PRA published the policy statement PS22/17, which provides feedback to responses to the consultation paper CP3/17 titled "Refining the PRA’s Pillar 2A capital framework." The PS22/17 contains the final amendment to the Reporting Pillar 2 Part of the PRA Rulebook (Appendix 1), along with the updates to the supervisory statements SS31/15 titled "The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)" (Appendix 2); SS32/15 titled "Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082" (Appendix 3); and statement of policy titled "The PRA’s methodologies for setting Pillar 2 capital" (Appendix 4).
In CP3/17, the PRA had made proposals related to adjustments to the PRA’s Pillar 2A approach for firms using the standardized approach for credit risk; revisions to the PRA’s internal ratings-based benchmark used for assessing credit risk; and additional considerations the PRA will make, as part of the SREP, for standardized approach firms using International Financial Reporting Standard (IFRS) as their accounting framework. The SS31/15 replaces SS5/13 and SS6/13 and is aimed at firms to which the Capital Requirements Directive (CRD) IV applies. It provides further detail in relation to the high-level expectations outlined in "The PRA's approach to banking supervision." The SS32/15 is of interest to banks, building societies, and PRA-designated investment firms. It sets out the PRA’s expectations of firms and provides further clarity on Pillar 2 reporting. It was updated to reflect amendments to the reporting requirements for data items FSA076 and FSA077 to remove reference to reporting on an ad-hoc or case-by-case basis. The statement of policy sets out methodologies that the PRA uses to inform the setting of Pillar 2 capital for firms to which CRD IV applies.
Related Links
Keywords: Europe, UK, Banking, Pillar 2A, ICAAP, Reporting, SREP, CRD IV, PS22/17, SS31/15, CP3/17, PRA
Featured Experts
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Salman Siddiqui
ESG and climate expert for P&C insurance; IFRS 17 specialist and chartered accountant; extensive experience in both life and non-life insurance, with focus on capital management, financial performance, and financial reporting.
Previous Article
PRA Consults on Methodologies for Assessing Pillar 2 Liquidity RiskRelated Articles
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.
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.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards