PRA Consults on Rules for Domestic Liquidity Sub-Groups
The Prudential Regulation Authority (PRA) proposed rules on the application of prudential liquidity requirements to domestic liquidity sub-groups. The published consultation paper (CP19/21) also proposed revisions to the approach to granting a domestic liquidity sub-groups permission. The consultation closes on October 12, 2021, with the rule finalization expected in November 2021 and the implementation date for the changes expected to be January 01, 2022.
Where certain conditions are met on the availability, distribution, management, and monitoring of liquidity, the Capital Requirements Regulation (CRR) allows PRA to waive the application of liquidity requirements at the level of an individual firm and to permit a firm to form a domestic liquidity sub-group; these requirements encompass the liquidity coverage ratio (LCR) and liquidity risk management, monitoring, reporting, and disclosures. Where a domestic liquidity sub-groups permission is granted, PRA requirements apply at the level of a domestic liquidity sub-group on the basis of the consolidated situation of its members, rather than applying to member firms individually. This reflects the ability of some firms to manage their liquidity jointly with other entities, as if they were a single entity. HM Treasury will revoke this provision from Saturday January 01, 2022. CP19/21 proposes to:
- Permit the inclusion in a domestic liquidity sub-group of firms that are subsidiaries of a common immediate UK qualifying parent undertaking that is not a bank or PRA-designated investment firm (referred to in this consultation as a "sibling domestic liquidity sub-group")
- Revise the conditions to qualify for a domestic liquidity sub-group permission and the factors that PRA will take into account when considering domestic liquidity sub-group applications
CP19/21 would result in changes to the Liquidity (CRR) Part of the PRA Rulebook and the Statement of Policy (SoP) titled "Liquidity and funding permissions." This consultation is relevant to PRA-authorized UK banks, PRA-designated UK investment firms, and building societies. It is also relevant to the UK financial or mixed financial holding companies that are the immediate parent undertakings of firms that may be included in a domestic liquidity sub-groups. It is not relevant to credit unions.
Comment Due Date: October 12, 2021
Keywords: Europe, UK, Banking, Liquidity Risk, Domestic Liquidity Sub Groups, CRR, Reporting, LCR, Disclosures, Basel, PRA
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous ArticleJFSA Consults on Rules in Final Basel Package and on LIBOR Cessation
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.