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Home > Prudential Regulation Authority > Pillar 2A capital requirements and disclosure – CP12/17
 

Pillar 2A capital requirements and disclosure – CP12/17

12 July 2017

Overview

This consultation paper (CP) sets out proposed adjustments to the Prudential Regulation Authority’s (PRA) Pillar 2A capital framework. It is relevant to all banks, building societies and PRA-designated investment firms.

This CP sets out proposals to change Supervisory Statement (SS) 31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ and the Statement of Policy (SoP) ‘The PRA’s methodologies for setting Pillar 2 capital’.

The PRA proposes to set Pillar 2A capital as a firm-specific capital requirement under section 55M of the Financial Services and Markets Act 2000 (‘the Act’), rather than as individual guidance. Consistent with the PRA’s current policy, under this proposal the requirement would be set at the level and quality of capital the PRA considers a firm should maintain, in addition to Pillar 1, to meet the overall financial adequacy rule.

In implementing these proposals, the PRA intends to update some of the existing capital terminology. The term ‘Total Capital Requirements’ (TCR) is introduced to refer to the amount and quality of capital a firm must maintain to comply with the Capital Requirements Regulation (575/2013) (CRR) (Pillar 1) and the Pillar 2A capital requirement. The term ‘Individual Capital Guidance’ (ICG) will be discontinued.

The PRA also proposes a revised disclosure policy in which the PRA expects firms to disclose their TCR or, where a Pillar 2A capital requirement has not yet been set, total Pillar 1 and Pillar 2A guidance. 

Finally, the PRA also proposes to provide clarity on when and how individual (solo) Pillar 2 capital requirements may be set.

The purpose of these proposals is to bring greater clarity, consistency and transparency to the PRA’s capital setting approach. In promoting a greater level of transparency and disclosure, the PRA seeks to promote financial stability, the safety and soundness of PRA-authorised firms, and facilitate more informed and effective competition in the banking sector.

Responses and next steps

This consultation closed on Thursday 12 October 2017.

Please address any comments or enquiries to CP12_17@bankofengland.co.uk.

The PRA proposes that the final policy will apply from 1 January 2018.

Consultation paper

Pillar 2A Capital Requirements and Disclosure – CP12/17

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