PRA Issues Final Policy on Updates to Pillar 2 Reporting Requirements
PRA published the final policy statement PS8/18 on Pillar 2 reporting requirements, updated the Supervisory Statement SS32/15 to reflect amendments to the reporting requirements, and published the data item PRA111 and its instructions, along with the updated Pillar 2 reporting schedule. PRA also updated the guidance on terms used in data items PRA111 and FSA071 to FSA082, which will be effective from October 01, 2018; however, the updated guidance on data items PRA111 and FSA071 to FSA082 for ring-fenced banks takes effect from January 01, 2019.
The appendices to PS8/18 contain:
- Final rules amending the Glossary, Regulatory Reporting Part, Reporting Leverage Ratio Part, and Reporting Pillar 2 Part of the PRA Rulebook (Appendix 1). The final rules will come into force on October 01, 2018.
- Final data item PRA111 (Appendix 2)
- Updated supervisory statement SS32/15 on Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082, and PRA111 (Appendix 3)
- Updated Statement of Policy on the PRA methodologies for setting Pillar 2 capital (Appendix 4)
SS32/15 was updated to reflect amendments to the reporting requirements. These include the introduction of data item PRA111 to capture stress testing data included in firms’ Internal Capital Adequacy Assessment Process (ICAAP) documents and a reduction in the frequency of reporting of the data items in the Reporting Pillar 2 Part of the PRA Rulebook for some firms. The appendices to SS32/15 include guidance on terms used in data items (Appendix 1), Pillar 2 reporting schedule (Appendix 2), and instructions for completing data items (Appendix 3); these appendices have been amended to reflect the changes mentioned earlier. PRA has amended the SS32/15 (paragraph 2.4) to reflect a nomenclature change from Firm Data Submission Framework (FDSF) to Stress Testing Data Framework (STDF). These changes take effect from October 01, 2018 and the updates for ring-fenced banks takes effect from January 01, 2019.
Furthermore, the updated Statement of Policy sets out the methodologies that PRA uses to inform the setting of Pillar 2 capital for firms to which Capital Requirements Directive (CRD) IV applies. Section I sets out the methodologies PRA will use to inform the setting of a firm’s Pillar 2A capital requirement for credit risk, market risk, operational risk, counterparty credit risk, credit concentration risk, interest rate risk in the non-trading book, pension obligation risk, and ring-fenced bodies (RFB) group risk. Section II provides information on the purpose of the PRA buffer, how it is determined, and how it relates to the CRD IV buffers. Section II also provides details on the PRA approach to tackling weak governance and risk management under Pillar 2B and RFB group risk. This policy takes effect from October 01, 2018 and the parts relevant for ring-fenced banks apply from January 01, 2019.
Related Links
Effective Date: October 01, 2018 (Final rules, SS32/15, and Statement of Policy); January 01, 2019 (SS32/15 and Statement of Policy updates for RFB)
Keywords: Europe, UK, Banking, Pillar 2, ICAAP, Stress Testing, Reporting, SS32/15, PS8/18, Statement of Policy, Ring Fencing, PRA
Featured Experts
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Nihil Patel
Data scientist; SaaS product designer; credit portfolio analyst and product strategist; portfolio modeler; correlation researcher
Previous Article
ESMA Updates Q&As on Application of AIFMD and MiFID IIRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
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.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
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.
