PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA) and the Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020). PS20/21 also contains a new Statement of Policy (SoP) on the supervisory measures and penalties in relation to financial holding companies and an updated SoP on the PRA approach to policy enforcement. The policy presented in PS20/21 will take effect on September 15, 2021.
PRA had proposed, in June 2021, the rules finalized now via the consultation paper CP12/21, to which PRA has received no responses and has thus made no changes. One of the proposals in CP12/21 involved ancillary amendments to the Definition of Capital, Groups, and Notifications Parts of the PRA Rulebook to ensure that, where the application of a consolidated prudential requirement also carries a secondary obligation, that obligation would rest at the appropriate level of application. The amendment to the Groups Part is made as part of the Rules at Annex F of the Rules instrument and will come into force on January 01, 2022, along with the other PRA Rules which implement Basel III. In addition, a new SoP on supervisory measures and penalties in relation to financial holding companies has been published; this SoP sets out the PRA approach to exercising supervisory measures and imposing penalties on UK parent financial holding companies and UK parent mixed financial holding companies (holding companies) pursuant to Part 12B of the Financial Services and Markets Act 2000 (FSMA), covering measures related to the imposition of penalties and the amount of penalties.
The finalized policy is aimed to give effect to the changes in the Capital Requirements Directive V (CRD V), as transposed, and the Capital Requirements Regulation 2 (CRR2), as "onshored," which impose direct responsibility for compliance with the consolidated prudential requirements on approved or designated holding companies. PS20/21 is relevant to financial holding companies, mixed financial holding companies, PRA-authorized banks, and PRA-designated investment firms that are part of a UK consolidation group, controlled by a UK parent financial holding company, or UK parent mixed financial holding company.
Related Links
- Notification
- PRA Rulebook Instrument 2021 (PDF)
- SoP on Measures and Penalties (PDF)
- SoP on Policy Enforcement (PDF)
- CP12/21 (PDF)
Effective Date: September 15, 2021
Keywords: Europe, EU, UK, Banking, CRD5, CRR2, PRA Rulebook, PS20/21, CP12/21, FSMA, Regulatory Capital, Prudential Requirements, Financial Holdings, Statement on Policy, Investment Firms, PRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Nick Jessop
Scenario modeling expert; risk management specialist; quantitative financial modeler
Previous Article
Nordea Bank and EIB Sign Agreement to Fund Green Projects in NordicsRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards