PRA Issues Proposals on Trading Activity Wind-Down in Resolution
The Prudential Regulation Authority (PRA) proposed, via CP20/21, expectations on firms’ engagement in trading activities that may affect the financial stability of United Kingdom. These proposals would result in a new Supervisory Statement on trading activity wind-down (TWD), a Statement of Policy (SoP), and amendments to SS9/17 titled "Recovery Planning." The proposed amendments to SS9/17 are in respect of the orderly wind-down of trading activities. The consultation period closes on January 21, 2022. PRA proposes that the implementation date for the changes resulting from CP20/21 would be January 01, 2025. Subject to the consultation responses, PRA intends to publish its final policy in the first half of 2022.
CP20/21 proposes that firms engaged in trading activities be able to carry out a full or partial orderly wind-down of their trading activities in recovery and post-resolution restructuring. In CP20/21, the wind-down of trading activities, whether it be full or partial, or whether it would be carried out as a recovery or post-resolution restructuring option, is referred to as the TWD option. The proposed expectations are designed to to promote safety and soundness of firms, with this objective advanced primarily by minimizing the adverse effect of firm failure on the financial stability of United Kingdom. The proposals aim to enhance the ability of firms to recover from firm-specific and/or market-wide stress and should be read in conjunction with the Resolvability Assessment Framework of BoE. The draft SoP on trading activity wind-down aims to provide clarity on interaction between expectations outlined in the SS9/17,and the BoE approach to assessing resolvability, including the BoE SoP, which was published alongside the BoE Resolvability Assessment Framework policies. PRA consulted industry when developing the proposed expectations. The proposals in CP20/21 include expectations that firms to whom the policy applies:
- include a baseline set of factors when designing the scenario or scenarios used to develop and test the TWD option/scenario
- develop information provision and decision-making capabilities and refresh capabilities
- produce and maintain data of a breadth and granularity consistent with the non-mandatory templates set out in the appendices of the draft TWD supervisory statement
CP20/21 is applicable to all PRA-authorized UK banks, their qualifying parent undertakings and PRA-designated investment firms that are engaged in trading activities, and relevant third country branches. The consultation is also relevant to policymakers and practitioners that would expect to be involved in a firm’s resolution.
Related Links
Comment Due Date: January 21, 2022
Effective Date (expected): January 01, 2025
Keywords: Europe, UK, Banking, Securities, Trading Activity Wind Down, Resolution Framework, Investment Firms, Resolvability Assessment Framework, CP20/21, ss9/17, Recovery Planning, PRA
Previous Article
PRA Decides to Maintain O-SII Buffers for Another YearRelated Articles
EBA Launches Stress Tests for Banks, Issues Other Updates
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
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.
