Featured Product

    PRA Consults on Management of Prudential Risks on Asset Encumbrance

    September 30, 2019

    PRA set out, via CP24/19, the proposed expectations from firms in managing the key prudential risks associated with asset encumbrance, specifically in the contexts of managing liquidity and funding risks, recovery planning, and resolution. The proposed expectations relate both to the internal monitoring and management of these risks and to the information that firms are expected to provide to PRA through their periodic regulatory submissions, such as Internal Liquidity Adequacy Assessment Process (ILAAP) documents and recovery plans. This consultation closes on January 17, 2020.

    The proposals relate to expectations on firms’ compliance with specific aspects of the existing PRA rules—namely those in the Internal Liquidity Adequacy Assessment (ILAA), Recovery Planning, and Resolution Pack Parts of the PRA Rulebook. PRA would give effect to the expectations proposed in CP24/19 by way of amendments to the supervisory statements SS24/15 on PRA approach to supervising liquidity and funding risks (Appendix 1); SS9/17 on recovery planning (Appendix 2); and SS20/15 on supervising building societies’ treasury and lending activities (Appendix 3). The policy proposals involve amendments to the existing supervisory statements to clarify the following:

    • Firms should consider appropriately and thoroughly the potential impact that asset encumbrance can have on their funding profiles and put in place adequate risk management processes that include monitoring key metrics at appropriate committees, with clearly defined accountability for risk management, setting limits where appropriate.  Firms should document these adequately in their ILAAP documents.
    • Building societies should manage their asset encumbrance in line with existing expectations and proposed expectations of PRA that have been set out in SS20/15 as well as with the proposed expectations of PRA for all firms in SS24/15 and SS9/17.
    • Firms should appropriately consider the effects that increased asset encumbrance might have on their abilities to maintain or restore their financial viability during a variety of stress scenarios.
    • Firms should ensure that their levels of asset encumbrance do not unduly impair the amount and cash value of the assets that could be lent against in resolution, including by BoE within its usual risk tolerance.

    CP24/19 is relevant to all PRA-authorized firms, except credit unions and insurance firms. PRA will keep the proposed approach and policy under review to assess whether any adjustments are required, including in light of the planned introduction of the Net Stable Funding Ratio (NSFR) standard. PRA will monitor the quality of information provided by firms in their ILAAP documents, recovery plans and, for applicable firms, as part of their assessments of their preparations for resolution, to ensure it is sufficient to meet the expectations set out in these proposals. The proposals have been designed in the context of the current UK and EU regulatory framework. 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: January 17, 2020

    Keywords: Europe, UK, Banking, Asset Encumbrance, Recovery Planning, Resolution, Resolution, ILAAP, NSFR, CP 24/19, PRA

    Featured Experts
    Related Articles
    News

    US Agencies Requests Comments on Use and Impact of CAMELS Ratings

    US Agencies (FDIC and FED) are seeking information and comments from interested parties regarding the consistency of ratings assigned by the agencies under the Uniform Financial Institutions Rating System (UFIRS).

    October 18, 2019 WebPage Regulatory News
    News

    BoE Announces Date for Publication of Stress Test Results for Banks

    BoE announced its plans to publish results of the full UK annual stress tests on December 10, 2019.

    October 18, 2019 WebPage Regulatory News
    News

    PRA Consults on Approach to Supervising Liquidity and Funding Risks

    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.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems.

    October 17, 2019 WebPage Regulatory News
    News

    FSI Paper Examines Use of Suptech Initiatives by Financial Authorities

    The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally.

    October 17, 2019 WebPage Regulatory News
    News

    ECB Publishes Recommendations on Euro Risk-Free Rates Transition

    ECB published a report, by private sector working group on euro risk-free rates, which contains recommendations, from a risk management perspective, on the transition to new risk-free rates.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Publish Notice to Extend Form FFIEC 102 for Three Years

    US Agencies (FDIC, FED, and OCC) published a joint notice regarding extension of the market risk regulatory report for institutions subject to the market risk capital rule (FFIEC 102).

    October 17, 2019 WebPage Regulatory News
    News

    FSB Report Examines Implementation and Impact of G20 Financial Reforms

    FSB published fifth annual report on the implementation and effects of the G20 financial regulatory reforms.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Launches Consultation on Comprehensive Pillar 3 Disclosures

    EBA proposed the new comprehensive implementing technical standard (ITS) for public disclosures by financial institutions.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Consults on Revised Technical Standards on Supervisory Reporting

    EBA launched a consultation on the revised implementing technical standards, or ITS, on supervisory reporting.

    October 16, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3997