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    PRA Issues Policy Statements on Refining Pillar 2A Capital Approach

    October 03, 2017

    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.

     

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    Keywords: Europe, UK, Banking, Pillar 2A, ICAAP, Reporting, SREP, CRD IV, PS22/17, SS31/15, CP3/17, PRA

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