In consultation paper (CP27/19), PRA published a proposal (CP27/19) to update the supervisory statement SS24/15 on the PRA approach to supervising liquidity and funding risk. The updated SS24/15 will reflect relevant updates to the Market Operations Guide of BoE and to reiterate the relevant expectations set out in SS9/17 on recovery planning. The consultation closes on November 17, 2019, with PRA proposing to apply the draft amendments to SS24/15 from the date of final publication.
The updates to SS24/15 propose that there should be no presumptive order in which firms should use the BoE liquidity facilities, including the Discount Window Facility, or draw down their own liquid asset buffers to meet a liquidity need. Firms would be expected to use their own judgment in applying for and using the BoE liquidity facilities. The proposals align the view of the appropriate usage of BoE facilities in SS24/15 with the Market Operations Guide. The proposed updates to SS24/15 would also reiterate that where firms view central bank liquidity facilities, including at BoE, as part of the their liquidity risk management strategy, PRA would expect this to be included as part of the credible recovery options outlined in the firms’ recovery plans.
BoE also published its Market Operations Guide, which outlines the BoE framework for its operations in sterling money markets and updates the Sterling Market Framework (formally known as the Red Book). The Market Operations Guide reiterates that there is a presumption that banks and building societies that meet the PRA Threshold Conditions for authorization may sign up to the Sterling Market Framework and gain access to borrowing under the Sterling Market Framework against eligible collateral. It also notes that BoE does not consider that there is a presumptive order of usage between the Sterling Market Framework and a firm’s liquid asset buffers. CP27/19 proposes to update SS24/15 so that it aligns with the updated Sterling Market Framework as set out in the Market Operations Guide. CP27/19 is relevant to PRA-authorized UK banks, building societies, and PRA-designated UK investment firms, referred to collectively as firms. The proposals have been designed in the context of the current UK and EU regulatory framework. PRA has assessed that the proposals will not be affected in the event that UK leaves EU with no implementation period in place.
Comment Due Date: November 17, 2019
Effective Date: Publication Date of Final Policy (Proposed)
Keywords: Europe, UK, Banking, Liquidity Risk, Market Operations Gide, Recovery Planning, CP 27/19, SS 24/15, PRA, BoE
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).
As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).