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    PRA Tightens Limit for Large Exposures to Certain French NFCs

    October 15, 2019

    PRA published a policy statement (PS24/19) that sets out the final rule on amendments to the Large Exposures Part of the PRA Rulebook (Appendix). The final PS24/19 follows a consultation (CP15/19) that proposed to tighten the large exposure limit to 5% of eligible capital in respect of the exposures of UK global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) to French non-financial corporations (NFCs). This amendment has been made pursuant to Article 395(1) of the Capital Requirements Regulation (CRR). This reciprocates the measure imposed by the Haut Conseil de stabilité financière (HCSF) in France in July 2018. PS24/19 will take effect on January 01, 2020.

    Although PRA received no responses to the consultation, it has made one minor change to the draft rule-making instrument (Rule 5.1) to remove possible ambiguity about the scope of application. PRA considers that this will have no impact on firms and, specifically, mutuals. The measure described in PS24/19 applies on a consolidated basis to the firms identified by PRA as G-SIIs and O-SIIs, under the Capital Requirements Directive (CRD) as implemented in the Capital Requirements (Capital Buffers and Macro-prudential measures) Regulations 2014. PS24/19 is, therefore, relevant to such firms and their subsidiaries.

    The policy set out in this PS24/19 has been designed in the context of the current UK and EU regulatory framework. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with EU take effect. In the event that UK leaves EU with no implementation period in place, PRA has assessed that the rule attached to PS24/19 would need to be amended under the EU (Withdrawal) Act 2018. Post the withdrawal of UK from EU, PS24/19 should be read in conjunction with the supervisory statement SS2/19 on PRA approach to interpreting reporting and disclosure requirements and regulatory transaction forms.

     

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    Effective Date: January 01, 2020

    Keywords: Europe, UK, France, Banking, Large Exposures, CRR, CRD, PRA Rulebook, HCSF Measure, G-SII, O-SII, PS24/19, CP15/19, Concentration Risk, PRA

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