Featured Product

    PRA Consults on Modeling Issues Under Solvency II Internal Models

    September 27, 2019

    PRA proposed, via the consultation paper CP23/19, the expectations from firms in respect of their modeling of income-producing real estate loans within their Solvency II internal models. PRA also proposed amendments to its expectations in respect of the use of internal credit assessments for assigning fundamental spreads for illiquid, unrated assets. This consultation closes on December 27, 2019 and the proposed implementation date for the proposals is March 31, 2020.

    The finalization of these proposals would result in changes to the supervisory statement SS3/17 on matching adjustment under Solvency II. PRA also proposed to change the name of the SS3/17 to reflect the proposed expansion of its scope; the proposed name change is from "Solvency II: Matching adjustment - illiquid unrated assets and equity release mortgages" to "Solvency II: Illiquid unrated assets." CP23/19 is relevant to UK insurance and reinsurance companies holding or intending to hold income-producing real estate loans. It is also relevant to firms investing in illiquid, unrated assets within their Solvency II matching adjustment portfolios. 

    PRA is mindful that the underlying risks and modeling challenges for  income-producing real estate loans are generally similar for both insurers and banks holding such assets. Therefore, PRA has attempted to set consistent expectations between insurers and banks, where appropriate. To this end, PRA has considered the differences in the way the Solvency II regulations apply to insurers and the way models for income-producing real estate loans are supervised under the respective Capital Requirements Regulation (CRR) and Directive (CRD IV), which apply to banks. 

    The proposals set out in CP23/19 have been designed in the context of the 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 the EU take effect. If UK leaves EU with no implementation period in place, PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018.

     

    Related Links

    Comment Due Date: December 27, 2019

    Effective Date: March 31, 2020 (proposed)

    Keywords: Europe, UK, Banking, Insurance, Solvency II, CRD IV, Matching Adjustment, Internal Model, CP 23/19, SS 3/17, Real Estate Loans, PRA

    Featured Experts
    Related Articles
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.

    January 13, 2022 WebPage Regulatory News
    News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News
    News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    CBE Issues Additional Measures to Ease Disruptions from Pandemic

    The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7868