PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

Below are the key highlights of the recent consultations from PRA:

• PRA published a consultation paper (CP17/23) on capitalization of foreign-exchange positions for market risk, with the comment period ending on January 31, 2024. The proposals relate to the post-Basel 3.1 PRA-proposed implementation described in CP16/22 and would result in changes to the proposed Article 325 (Approaches for Calculating the Own Funds Requirements for Market Risk) in the proposed Market Risk: General Provisions (CRR) Part of the PRA Rulebook (Appendix 1), the proposed supervisory statement (SS13/13) – Market Risk from CP16/22 (Appendix 2), and the CRR Permission 352(2) supplementary application form (Appendix 3). This consultation also clarifies that items held on the balance sheet at historical exchange rates are not to be included as a risk position for the purposes of calculating Pillar 1 capital requirements.
• PRA is seeking comments, until November 27, 2023, on the rule and policy updates (in CP20/23) with respect to the establishment of third-country branches and subsidiaries within ring-fenced body sub-consolidation groups. HM Treasury is also consulting on legislative changes that, among other things, would allow ring-fenced bodies to establish entities in third countries. This would allow ring-fenced bodies to compete with international and domestic banking groups, advancing the PRA’s secondary objectives of competition and competitiveness and growth. The proposals in CP20/23 would result in changes to the Ring-fenced Bodies Part of the PRA Rulebook (Appendix 1) and supervisory statement (SS8/16) on Ring-fenced bodies (RFBs) (Appendix 2). The resulting changes are expected to be implemented by the first half of 2024.
• PRA and the Financial Conduct Authority (FCA) proposed measures to boost diversity and inclusion in financial services, with the feedback periods on both consultations ending on December 18, 2023 and the final rules final rules planned for publication in 2024. The proposals cover integration of non-financial misconduct into the existing regulatory framework, requirements for reporting of diversity and inclusion data, implementation and governance of D&I strategies, and setting of diversity targets. The PRA proposals are applicable to all CRR and Solvency II firms in the UK, including third country branches (excluding credit unions). PRA proposes that firms would report yearly during a three-month window following a reporting reference date that would be specified on publication of the final policy. Both PRA and FCA have proposed one regulatory reporting template (Appendix 7 of PRA consultation paper), with reporting submission expected via the RegData platform of FCA. 

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