PRA Issues Proposals on Trading Activity Wind-Down in Resolution
The Prudential Regulation Authority (PRA) proposed, via CP20/21, expectations on firms’ engagement in trading activities that may affect the financial stability of United Kingdom. These proposals would result in a new Supervisory Statement on trading activity wind-down (TWD), a Statement of Policy (SoP), and amendments to SS9/17 titled "Recovery Planning." The proposed amendments to SS9/17 are in respect of the orderly wind-down of trading activities. The consultation period closes on January 21, 2022. PRA proposes that the implementation date for the changes resulting from CP20/21 would be January 01, 2025. Subject to the consultation responses, PRA intends to publish its final policy in the first half of 2022.
CP20/21 proposes that firms engaged in trading activities be able to carry out a full or partial orderly wind-down of their trading activities in recovery and post-resolution restructuring. In CP20/21, the wind-down of trading activities, whether it be full or partial, or whether it would be carried out as a recovery or post-resolution restructuring option, is referred to as the TWD option. The proposed expectations are designed to to promote safety and soundness of firms, with this objective advanced primarily by minimizing the adverse effect of firm failure on the financial stability of United Kingdom. The proposals aim to enhance the ability of firms to recover from firm-specific and/or market-wide stress and should be read in conjunction with the Resolvability Assessment Framework of BoE. The draft SoP on trading activity wind-down aims to provide clarity on interaction between expectations outlined in the SS9/17,and the BoE approach to assessing resolvability, including the BoE SoP, which was published alongside the BoE Resolvability Assessment Framework policies. PRA consulted industry when developing the proposed expectations. The proposals in CP20/21 include expectations that firms to whom the policy applies:
- include a baseline set of factors when designing the scenario or scenarios used to develop and test the TWD option/scenario
- develop information provision and decision-making capabilities and refresh capabilities
- produce and maintain data of a breadth and granularity consistent with the non-mandatory templates set out in the appendices of the draft TWD supervisory statement
CP20/21 is applicable to all PRA-authorized UK banks, their qualifying parent undertakings and PRA-designated investment firms that are engaged in trading activities, and relevant third country branches. The consultation is also relevant to policymakers and practitioners that would expect to be involved in a firm’s resolution.
Related Links
Comment Due Date: January 21, 2022
Effective Date (expected): January 01, 2025
Keywords: Europe, UK, Banking, Securities, Trading Activity Wind Down, Resolution Framework, Investment Firms, Resolvability Assessment Framework, CP20/21, ss9/17, Recovery Planning, PRA
Previous Article
PRA Decides to Maintain O-SII Buffers for Another YearRelated 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.
